We recently compiled a list of the 10 Best Middle East and Africa Stocks To Buy According to Analysts. In this article, we are going to take a look at where Mobileye Global (NASDAQ:MBLY) stands against the other Middle East and Africa stocks.
MENA’s Economic Outlook for 2024 and the Rising Interest in Private Equity and Venture Capital Investments
According to the Middle East and North Africa Economic Update report published by the IMF in April 2024, the Middle East and North Africa (MENA) region will experience modest growth of 2.7% in 2024, up from 1.9% in 2023. Both oil importers and exporters in the region are expected to grow at similar rates in 2024. The forecasted growth difference between the Gulf Cooperation Council (GCC) economies and developing oil importers (excluding Egypt) is nearly 1%. GDP per capita is expected to rise by just 1.3% in 2024, driven almost entirely by the GCC economies. The impact of ongoing conflicts has ceased economic activity, particularly in Palestine. In Gaza, economic activity has nearly dropped by 86% in the fourth quarter of 2023 compared to the same quarter in 2022. The Palestinian economy’s outlook remains highly uncertain, heavily dependent on the conflict’s progression. The disruptions in maritime transportation, particularly through the Suez Canal, affected both regional and global trade.
Over the past decade, most MENA economies have seen increases in their debt-to-GDP ratios as MENA oil importers struggle to reduce their debt-to-GDP ratios due to high oil prices. Additionally, oil importers have been unable to lower their debt-to-GDP ratios through inflation, mainly due to exchange rate fluctuations and off-budget factors, known as stock-flow adjustments, highlighting the need for greater debt transparency. On the other hand, for MENA oil exporters, periods of high GDP growth are typically associated with smaller increases in nominal debt stocks, leading to a slower rise or even a decrease in the debt-to-GDP ratio.
However, interest in private equity (PE) and venture capital (VC) has been surging in the Middle East and Africa, reflecting a notable shift in investment preferences within the region. According to recent data, provided by Preqin, in collaboration with the Dubai International Financial Centre (DIFC), approximately 65% of investors in the region are either planning to maintain or increase their exposure to private equity this year. Similarly, 56% of investors are keen to do the same with their venture capital investments. This growing interest is partly due to the region’s historical under-investment combined with an optimistic outlook on the regional economic and market conditions.
Despite challenges due to geopolitical tensions, venture capital remains a critical component of the investment ecosystem. The sector is expected to recover as it adapts to the current economic conditions. In the Middle East, investor sentiment towards VC and PE is generally positive. A significant portion of regional investors have reported that their PE and VC investments have met or exceeded expectations. Sectors such as fintech, technology, healthcare, and infrastructure are particularly attractive to investors.
The Middle East and North Africa region is poised for a modest economic recovery in 2024, however, geopolitical tensions and conflicts continue to pose significant challenges. As MENA economies navigate through fluctuating global conditions and regional disruptions, the interest of private equity and venture capital investors reveals the region’s promising outlook for investors and economic stakeholders.
Our Methodology
For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 40 largest companies in the Middle East and Africa by market cap. From that list, we narrowed our choices to the 10 stocks that analysts see the most upside to. The list is sorted in ascending order of analysts’ average upside potential, as of August 23. We also included the market cap of the companies as of August 23. The list is sorted in ascending order of their average upside potential as of August 23.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A driverless vehicle navigating city traffic, equipped with ADAS and safety features.
Mobileye Global (NASDAQ:MBLY)
Upside Potential: 75.90%
Market Cap: $1.38 Billion
Mobileye Global (NASDAQ:MBLY) is headquartered in Israel and specializes in advanced driver-assistance systems (ADAS) and autonomous driving technologies. Mobileye Global (NASDAQ:MBLY) is majority-owned by Intel. Mobileye Global’s (NASDAQ:MBLY) vision-based systems are integrated into millions of vehicles by more than 50 automotive manufacturers such as Ford Motor, General Motors, Honda, Nissan, BMW, Audi, and Volkswagen which enhance safety and driving efficiency.
In Q2, Mobileye Global’s (NASDAQ:MBLY) revenue increased 84% quarter-over-quarter to $439 million. However, the company faced pressure due to a lowered full-year outlook, now expected to be under $1.7 billion versus previous consensus estimates of $1.83 billion. This revision is largely attributed to market softness in China, rather than company-specific issues. The company’s outlook for 2025 and beyond remains robust, with expectations of substantial volume growth from Western and Chinese OEMs, particularly with the rollout of its SuperVision and other advanced systems.
The shift towards more advanced systems will support Mobileye Global (NASDAQ:MBLY) to sell higher-priced systems. The company has identified key drivers for long-term growth in the ADAS market, and the increased adoption of its newer systems such as EyeQ6, a custom hardware and software solution specifically designed for ADAS and self-driving systems is expected to drive significant growth in average selling price, as the company fulfills its high-volume sales. Mobileye Global’s (NASDAQ:MBLY) REM (Road Experience Management) system provides real-time road information and enhances the safety and effectiveness of autonomous driving. Additionally, its RSS (Responsibility Sensitive Safety) model and True Redundancy approach provide reliable autonomous systems. While competitors focus on cost-effective, camera-only solutions Mobileye Global’s (NASDAQ:MBLY) uses radar and lidar systems which are more accurate. Despite increased competition, Mobileye Global’s (NASDAQ:MBLY) focus on higher-value solutions positions it well to capitalize on the ongoing industry trend towards more autonomous driving systems.
According to a report by Markets and Markets, the global market for Advanced Driver Assistance Systems is projected to expand from 334 million units in 2024 to 655 million units by 2030, growing at a CAGR of 11.9%. The company’s emphasis on advanced systems, combined with its growing customer base and strong market position, suggests significant upside potential.
In its first quarter investor letter Baron Fifth Avenue Growth Fund stated the following regarding Mobileye Global (NASDAQ:MBLY):
“We also modestly increased our positions in The Trade Desk and Mobileye Global Inc. (NASDAQ:MBLY). The assisted and autonomous driving solution provider, Mobileye, experienced significant stock price volatility as a result of reporting weak quarterly results on the back of an inventory build-up, which led the company to reduce near-term shipments materially, resetting expectations for 2024. Despite the near-term cyclical correction, we don’t believe the issues are structural, and we are more focused on the continued adoption of Mobileye’s advanced programs such as Supervision, which would increasingly become the key growth driver for the business.”
In the second quarter, Mobileye Global’s (NASDAQ:MBLY) stock was held by 28 hedge funds with stakes worth $455.40 million. The stock is trading at $13.90 as of August 28. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $24.45, which represents a 75.90% upside potential from its current level.
Overall MBLY ranks 3rd on our list of the best Middle East and Africa stocks to buy according to analysts. While we acknowledge the potential of MBLY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MBLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
