Hi VanLiew,

Progress is great. Have small position in a child’s account. I put this post on the RB:TSLA board where J.Sergeant mentioned them.

Yes, agreed they had a good quarter, but this still looks like very rich pricing. I had a quick look at the earnings release. They have done about $104M revenue in 9 months. They will probably get to $150M by the end of 2014. That would still put them at 60x sales. That’s pretty steep, although it’s hard to tell what would be an acceptable multiple for a company like this.

These guys have great margins (about 70% gross margin). I was thinking of comparing with Gentex, which makes auto-dimming mirrors for cars and is the leader in that space. Gentex is of course more mature and it will roughly get revenue around $1.4B this year at a decent gross margin of around 40%. Now Gentex shares are going for 3x sales, so may be with MBLY’s superb margins and opportunity as the leader in the space we can afford it says multiple of 10x - 20x sales. If so, the stock is anywhere between 3 to 6x over priced.

May be the best comparison for MBLY is Ambarella (AMBA). AMBA addresses a range of different markets including the camera market, more specifically the wearable sports cameras (GOPRO); automotive aftermarket cameras, security cameras; telepresence cameras; and camcorders. It also works in the infrastructure market, where they provide solutions for efficient management of IP video traffic, broadcast encoding and transcoding and IP video delivery applications. AMBA is also strongly growing revenues and enjoys high gross margins, typically in the low 60% range. AMBA and MBLY are similar in that they both are SoC solutions, they are fabless, and they are selling highly specialised software that run efficiently. My impression is that AMBA also has a pretty large market opportunity.

So, how much is AMBA selling for? With about $170M in TTM revenue and a market cap of $1.5B, AMBA’s stock is priced around 9x sales on TTM basis. If AMBA is selling for 9x sales, I can’t really see why MBLY should be selling for 60x sales and have a $10B valuation.

And now that I wrote this post, it seems prudent that I close my written puts on MBLY!!!