Is Mobileye Global Inc. (MBLY) is the worst performing stock to buy on a decline?

We recently created a list of the 10 worst-performing stocks to buy on a dip. In this article, we will look at where Mobileye Global Inc. (NASDAQ:MBLY) is among the worst performing stocks to buy on a dip.

Capital markets showed increased volatility starting in August 2024 and continuing through September 2024. As a result, strong gains followed numerous days of negative performance. Therefore, these moves have helped keep the stock moving in an overall positive direction. Market experts believe that it is a great time to invest in stocks. For those who have money in cash, the current situation creates an opportunity to invest capital in long-term assets.

Wall Street experts believe markets are concerned about signs of economic softness. Experts are still assessing how quickly the US Fed will respond to this by adjusting its interest rate policy. As the US Fed begins to cut key interest rates, global money managers continue to wonder whether it is too late or whether these actions will support the broader economy and further growth in corporate profits. The economic environment has now changed – inflation is falling and the labor market appears somewhat weaker. Market experts believe that leadership in the stock market has changed dramatically, with technology stocks suffering a slight decline in the third quarter after leading the market’s gain since late 2022.

Market rotation in the third quarter and factors influencing market development

According to US Bank, a subsidiary of US Bancorp, there was a significant change in the S&P 500 index in the third quarter. The bank emphasized that the once dominant technology sectors (IT and communication services), which overtook other sectors in 2023 and in the first half of 2024. he gave away some of the profits. As a result of the softening interest rate environment, investors have decided to shift their focus. The US bank then emphasized that the biggest beneficiaries of the third quarter were real estate and utilities companies.

Going forward, inflation, labor market trends, corporate spending patterns, corporate earnings and stock valuations are likely to dominate the broader U.S. stock market. USA Bank mentioned that Q2 2024 results recorded an increase of over 10% compared to Q2 2023 results. Despite the challenges related to the economic slowdown, result expectations have not changed. In particular, markets continue to expect earnings growth to continue through the end of 2024 and 2025. According to FactSet’s earnings report (dated September 20, 2024) for the third quarter of 2024, the estimated (annualized) earnings growth rate for the S&P 500 index was 4.6%. While analysts expect year-over-year earnings growth of 10.0% in 2024, they expect ~15.2% in 2025.

The story continues

In the face of volatility, markets will see a quick recovery

For the first seven months of 2024, the broader market moved forward with only minor interruptions and volatility. After a difficult start in August, stock markets quickly recovered, and broader markets ended the month in positive territory again before starting September on a volatile note. Most of the volatility was driven by expectations for a series of Fed rate cuts. This can be considered an important driver of the broader market, mainly when economic attention focuses on labor market conditions rather than inflation risks.

Market experts believe that in the face of high volatility, large-cap stocks have been able to maintain their advantage.

Small cap outperformed in July, as the Russell 2000 Small Cap Index gained over ~10% compared to ~1% gain in the S&P 500 Large Cap Index. This was primarily due to the prospect of Fed rate cuts, which led to a near-term shift toward smaller stocks. However, the shift toward small-cap stocks stalled again in August, with the S&P 500 index once again outperforming mid- and small-cap stocks. Over the past month, the Russell 2000 Index is up ~0.3%, while the S&P 500 Index is up over ~2%. This shows that in the face of macro-level volatility and changes, established stocks should be favored as they provide relatively good entry points.

Our methodology

To create a list of the 10 worst-performing stocks to buy on declines, we used Finviz’s screening tool and online rankings to filter out stocks that have fallen significantly since the beginning of the year. Finally, we ranked stocks according to their potential upside as of September 27. We also included the number of hedge fund holders for each stock as of Q2 2024, which we obtained from our database of over 900 elite hedge funds.

Why are we interested in stocks that hedge funds invest in? The reason is simple: our research has shown that we can outperform the market by imitating the best stocks of the best hedge funds. As part of our quarterly newsletter strategy, we select 14 small- and large-cap stocks every quarter, and since May 2014, we have returned 275%, beating our benchmark by 150 percentage points (see more details here).

Mobileye Global Inc. (NASDAQ:MBLY)

Average growth potential: 57.12%

% decrease cumulatively: ~65%

Number of hedge fund portfolios: 28

Mobileye Global Inc. (NASDAQ:MBLY) develops and deploys advanced driver assistance systems (ADAS) and autonomous driving technologies and solutions worldwide.

On the share price of Mobileye Global Inc. (NASDAQ:MBLY) is driven by several factors, with investor confidence weakening due to a weaker-than-expected outlook for the second half of 2024 and 3 consecutive financial guidance cuts. Investors have become cautious as the broader technology sector continues to struggle, resulting in a revaluation of growth prospects amid heightened economic volatility and uncertainty. There are concerns about Mobileye Global Inc.’s revenue and earnings forecasts. (NASDAQ:MBLY) as a result of volatile demand for the company’s driver-assistance chips in China. SuperVision’s 2024 forecasts were also impacted by instability in China. The company also highlighted lower lower-level ADAS utilization rates, which can be attributed to factors such as residual inventory.

Taking this into account, Wall Street analysts and market experts continue to be optimistic about the company’s future development prospects. They believe that EyeQ and SuperVision volume growth should be maintained, and that cooperation with Zeekr on next-generation vehicles should help Mobileye Global Inc. (NASDAQ:MBLY) on its growth journey. Despite short-term volume challenges in China, the company is optimistic about the long-term prospects in the region. Additionally, the expected recovery of market share through localization efforts and lower-cost solutions should help Mobileye Global Inc. (NASDAQ:MBLY).

The company continues to position itself for significant design wins in the SuperVision and Chauffeur verticals by the end of 2024, with the goal of achieving market leadership in these areas. Development of the core ADAS offering should start in the second half of 2026 and early 2027.

Evercore ISI analysts maintained their “Outperform” rating and set a target price for Mobileye Global Inc. shares. (NASDAQ:MBLY) at $35.00 on the 26th^vol August. Of the 912 hedge funds tracked by Insider Monkey at the end of the second quarter of 2024, 28 hedge funds reported holding shares in the company.

Baron Funds, an investment management company, published its investor letter for the first quarter of 2024. Here’s what the fund said:

MBLY in general ranks 5th on our list of the worst performing stocks to buy on a decline. While we recognize MBLY’s potential as an investment, our belief is based on the belief that some deeply undervalued AI stocks are more likely to deliver higher returns, faster. If you’re looking for a deeply undervalued AI stock that has more promise than MBLY but is trading at less than 5 times its earnings, check out our report on cheapest AI stocks.

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Disclosure: None. This article was originally published on Insider Monkey.