Forget Tesla: These 2 Earnings Reports Reveal Where the Auto Market Is Heading

Key Points

• General Motors showed that traditional auto profits remain strong when pricing, trucks and SUVs hold up.
• Mobileye’s results showed adoption of driver-assistance technology is still growing, but pricing and leadership uncertainty remain concerns.
• Together, the reports suggest the future of autos may come in stages rather than through a smooth, fast shift to EVs and autonomy.

General Motors Co. NYSE: GM and Mobileye Global Inc. NASDAQ: MBLY both reported earnings recently, and between them, they said as much, if not more, about where the car industry is actually heading than any amount of noise around Tesla Inc. NASDAQ: TSLA after its own report.

The two sit at opposite ends of the same industry. GM, a $73 billion auto-giant, tells you what consumers are buying, what they're willing to pay, and whether the shift to electric is making or losing money. Mobileye, an $8 billion auto-technology company, tells you what automakers are spending on the driver-assistance and autonomy systems meant to define the next decade.

Get General Motors SMS alerts:

Sign Up

Read together, the two reports point to a conclusion that won't please anyone hoping the future of driving arrives on schedule. For investors willing to accept that, though, both stocks offer an interesting way to play it.

GM Is Making Money the Unglamorous Way

The message from GM’s report was clear: demand is solid. The company beat on both lines and raised full-year profit guidance for the second time this year, which isn't something a business does when it's worried about what's coming.

What sits underneath that is more interesting. GM has been holding pricing relatively steady, rather than trying to buy volume through discounts, with its incentive spending running comfortably below the industry average. That distinction matters because a carmaker that has to discount to move inventory is telling you something very different from one that doesn't.

Unsurprisingly, its truck and SUV franchise remains the engine. GM held well over 40% of the U.S. full-size pickup market in the quarter, and its large SUVs are outselling the nearest competitor by roughly three to one. Margins expanded meaningfully on the back of lower warranty costs and better operating efficiency, while the software side of the business, built around OnStar and Super Cruise, kept growing at a healthy clip.

There was one blemish of note: management trimmed net income guidance because of ongoing electric vehicle (EV) costs, even as it raised the operating profit outlook. In other words, its traditional business is doing the heavy lifting, and the ongoing electric transition is still finding its way.

Mobileye Is Winning Adoption But Losing Margin

Mobileye's report was a little messier, though, at the same time, more revealing. The company also beat analyst expectations, but shares traded down anyway on a combination of soft forward guidance and news that its founder, Amnon Shashua, intends to step down, with no successor yet named.

That latter headline was always going to spook investors, but the number that mattered the most was buried in the guidance. Unit shipments actually grew year on year, meaning automakers are still fitting Mobileye's systems into more vehicles. But the average price per system fell, which helps explain why the company is guiding to roughly flat revenue despite selling more units.

That's the whole story in a sentence. Adoption of driver-assistance technology might be intact and broadening, but the economics are not improving at the same pace, squeezed in part by the growth of Chinese automakers exporting at volume. In other words, its technology is being used more and more, but that isn't translating into stronger pricing.

Analysts See Similar Upside But Different Risk Profiles

The reaction to both reports was interesting. GM saw a wave of price target increases in the days after its print, with Goldman Sachs, Morgan Stanley, Royal Bank of Canada and TD Cowen all moving higher while maintaining bullish ratings. The most aggressive of those came from TD Cowen, whose fresh street-high target of $132 implies close to 60% upside from current levels.

Mobileye's results weren’t covered as in-depth, but the upside opportunity identified was equally compelling. The team at Needham reiterated their Buy rating on the stock with a target of $13, also implying close to 60% upside.

However, investors getting involved need to be aware that Mobileye’s chart is not for the faint of heart, and the stock was printing all-time lows as recently as April. GM, on the other hand, is sitting just a few dollars off its all-time high.

Why GM Looks Stronger Than Mobileye Right Now

With that in mind, GM clearly has the stronger hand and offers investors a safer opportunity. It's generating cash from products people are paying full price for, it's raising guidance rather than trimming it, and the market has been happy to lean into its track record.

Mobileye may still get there eventually, but this week’s report added two new uncertainties to a story that already had plenty. Falling per-unit pricing and an unplanned leadership transition aren't usually the conditions under which a stock starts reversing a multi-year sell-off.

You could argue that the case for avoiding auto stocks altogether is easier to make than it was a year ago, given tariffs, commodity costs and an electric transition that keeps costing more than expected. But sitting the sector out entirely means ignoring at least one business that’s currently converting strong demand into rising profit forecasts, which is not something the industry is offering in many other places right now.