Intel (INTC) Shares Surge on Plans to Take Mobileye Public, Morgan Stanley Says Move a Significant Positive

December 7, 2021 7:03 AM EST
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Intel (NASDAQ: INTC) announced yesterday it has decided to take its Mobileye business public in mid-2022 via an IPO.

The company’s management led by CEO Pat Gelsinger believes this move will help unlock the value for shareholders by creating a separate company while retaining a majority stake.

The WSJ reported yesterday that Intel is seeking a $50 billion valuation for Mobileye after paying $15.3 billion to take the company private a few years ago.

“Intel’s acquisition of Mobileye has been a great success. Mobileye has achieved record revenue year-over-year with 2021 gains expected to be more than 40 percent higher than 2020, highlighting the powerful benefits to both companies of our ongoing partnership. Amnon and I determined that an IPO provides the best opportunity to build on Mobileye’s track record for innovation and unlock value for shareholders,” Gelsinger said.

Morgan Stanley analyst Joseph Moore has weighed in to discuss Intel’s plans for Mobileye. For him, the IPO move is a “significant positive” for Intel. Moore rates Intel shares with an Equal Weight rating and a $55.00 per share price target.

“We have highlighted for multiple years the significant value represented by the company's 100% ownership of Mobileye - and, more controversially, we have felt that there was very limited synergy between Mobileye and Intel's core business. While we would estimate that the value of Mobileye has increased substantially since the acquisition, that value has come more from the software and services opportunities within the AV/ADAS stack, as in-housing the SoC never meaningfully materialized. Further, the significantly different business requirements of Mobileye could prove distracting, and attempts to rationalize synergies by in-sourcing silicon has proven problematic in the past (in the case of baseband),” Moore said in a client note.

Still, the analyst is “somewhat cautious on Intel's shares” after the company announced major investments last quarter, which remains a “key concern” among investors and analysts.

Northland Capital Markets analyst Gus Richard reiterated a Market Perform rating and a $49.00 per share price target on the Intel stock.

“We estimate Mobile revenue will be $1.3B this year and implying a 41x revenue valuation. In our view, the close comp is AMBA which is trading at 22x CY21 revenue. We believe the relative valuation is reasonable. Mobileye is the leading supplier of silicon and software for ADAS. Moblieye is in an estimated 45M to 50M vehicles, and it collects driving data from these cars. Data is the feedstock in an AI-driven world and Mobileye has more driving data than everyone else combined. Mobileye is leading the deployment of Robotaxi and mobility as a service. This makes Mobileye a valuable asset for an autonomous vehicle future.” Richard wrote in a client note.

Intel shares are up over 9% in pre-open Tuesday.

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