I attended a panel discussion last week in Los Angeles that covered the future of the automobile and transportation in general. Even in this car-obsessed city, there is a big push to build out light rail, expand the subway system and promote biking via more dedicated lanes.

One thing all of the expert panelists agreed on: The automobile over the next 10 years is in for a period of rapid evolution. While fully autonomous vehicles are the ultimate goal, this is most likely still years away (especially in the U.S.) given all of the complex regulatory and insurance issues.

Technology is the driving force behind all of the upcoming changes, as autonomous cars require the coordination of multiple cameras around the vehicle to provide both a wide field of vision and protective redundancy. To be fully functional, the technology needs to be able to detect and monitor traffic lights, along with obstacles outside of the driving path.

As the trend toward fully autonomous driving moves forward, cars will gradually get a lot safer and smarter, aided by the addition of more software. It’s estimated that the average car today has software content of 10%; this is expected to reach 40% over the next several years.

Mobileye (MBLY), the leading provider of camera-based advanced driver assistance systems (ADAS), is one company at the forefront of the auto tech megatrend. With an estimated 80% share of the vision-based driver assistance segment, Mobileye dominates, offering the most complete set of safety and convenience functions currently available.

What sets Mobileye apart is its EyeQ system-on-chip (SoC) solution, which delivers high performance and low energy consumption at a low cost. EyeQ enables real-time visual recognition and scene interpretation across various traffic situations involving lane departure warnings, lane change support, collision warnings, traffic jam assistance, adaptive cruise control and intelligent high beams. It took Mobileye five years (starting in 2007) to ship its first 1 million EyeQ chips; more than 2 million were shipped last year alone.

Mobileye is currently working with 21 automakers (up from seven in early 2010), and there are roughly 4.5 million cars on the road today with the company’s technology. Most of the big names are customers: Audi, BMW, Ford, Chrysler, GM, Nissan, Jaguar Land Rover, Tesla and Volvo. As of the end of last year, Mobileye solutions were available in 160 different car models from 18 manufacturers.

By 2016, the company will have products ready for implementation in more than 240 models. Starting next year, semi-autonomous capabilities will begin to really expand, first with hands-free highway driving at highway speeds, as well as driving in certain congested traffic situations; Mobileye has design wins with two auto manufacturers to launch these features in 2016. Sometime early this year, the company expects to debut camera-only auto emergency braking (AEB) through multiple automakers.

While competition will naturally heat up as ADAS technology becomes more mainstream, Mobileye wants to hold onto as much of its big market share as possible. To do so, the company continuously improves its technology: EyeQ2 was 6x faster than the original and EyeQ3, launched for vehicles in 2015, is 8x faster than the previous version.

Introduced earlier this month, the EyeQ4 SoC features four CPU cores containing four hardware threads each, coupled with six cores of Mobileye’s Vector Microcode Processors. The enhanced capabilities enable the EyeQ4-based ADAS to use groundbreaking computer vision algorithms in the processing of information from eight cameras simultaneously at 35 frames per second.

The EyeQ4 accepts multiple inputs from a trifocal front-sensing camera configuration; surround-view-systems of four wide-field-of-view cameras; a long-range rear-facing camera; and information from multiple radars and scanning beam laser scanners. All of these features work together to form a “safety cocoon” around the vehicle, something that is essential for truly autonomous driving.

Mobileye by Q4 of this year will deliver EyeQ4 engineering samples, with the first test hardware expected to be available in Q2 of 2016. The company has already secured the first design win for the EyeQ4 (with a premium European car manufacturer); production using the new SoC could begin by early 2018.

Last week, Mobileye announced a promising partnership with Valeo, a manufacturer of driving assistance systems/laser scanning technology. As part of the agreement, Valeo will design and develop a range of front-facing camera solutions and sensor fusion products using Mobileye’s EyeQ family of microprocessors. In addition, the companies will develop a joint product for the automated driving market. While it will be some time before a final product results from this partnership, this is a good example of Mobileye’s solutions gaining traction with a top automotive equipment vendor.

Given Mobileye’s strong fundamentals (revenue last year of $143.6 million was up 77%), investors have been quite bullish on the company’s prospects, bidding up the shares to a lofty valuation. The August 2014 IPO was a success: priced at $25, the stock started trading at $36. After hitting a post-IPO high of $60.28 in early October, valuation concerns took over, sending the shares to a low of $32.41 on March 3.

Following the stock’s recent rebound to the low $40s, Mobileye sports a market cap of $8.9 billion, still a whopping 40 times the 2015 consensus revenue estimate of $218.3 million and 25x the 2016 consensus of $344.5 million. While top-line growth is impressive for sure (expected to average 54.9% during the next two years), there’s clearly a big disconnect when it comes to the current valuation. Investors believe Mobileye has plenty of upside potential as part of this emerging megatrend, and are willing to pay up for the stock.

Plus, Wall Street has gotten behind the Mobileye story, with William Blair applauding the company’s business model (strong secular demand, sustainable technological advantages, high profit margins and financial visibility), saying revenue could reach $1 billion by 2020.

Morgan Stanley has been especially bullish, with positive assumptions involving pricing, margins and Mobileye’s ability to hold its market share close to 80%, vs. a steady decline to around 50% several years out as part of a more likely scenario. Morgan Stanley predicts that within eight years half of all new cars sold globally will be equipped with some form of ADAS or autonomous system (up from 2% today), rising to 70% by 2028.

Last week, Goldman Sachs upgraded Mobileye shares to ‘Buy’ with a price target of $50, saying the company offers credible exposure to the fast growing ADAS market, superior disruptive technology, solid execution and strong revenue/earnings growth. The firm expects the front-facing, camera-based ADAS market to experience a 37% CAGR for the period 2014 to 2020.

Goldman sees ADAS penetration in vehicles reaching roughly 50% in Europe by 2020, with other regions to follow. The firm says Mobileye’s monocular camera solution is superior to other technological approaches to ADAS (like radar), especially for certain functions, such as pedestrian automatic emergency breaking (PAEB).

No question, the outlook for Mobileye is bright. Just from a safety perspective, automakers are going to need to equip their cars with more ADAS technology to stay competitive. But it’s still early in this auto tech megatrand, and most of the near-term good news is priced into Mobileye shares right now, so it’s prudent to keep the company on a watch list, and hold out for a better entry level on the stock.