Intel Analyst Reacts To Mobileye IPO: 'Smart Move To Unlock Value'

Intel Corporation INTC shares traded higher by 8% on Tuesday morning after the company announced a plan to take its self-driving car unit Mobileye public in mid-2022. The market reacted positively to the news, and one analyst said Tuesday the IPO could be a great way for Intel to unlock value in its struggling shares.

The Analyst: Bank of America analyst Vivek Arya reiterated his Underperform rating for Intel but raised his price target from $45 to $50.

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The Thesis: Intel acquired the Jerusalem-based Mobileye in 2017 for $15.3 billion. Despite soaring share prices in many autonomous vehicle technology stocks in the past two years, Intel shares have lagged as it has struggled with production issues and market share losses to Advanced Micro Devices, Inc. AMD, NVIDIA Corporation NVDA and other competitors. Intel shares are down 11.1% in the past six months.

Some media outlets suggest Mobileye could be valued at roughly $50 billion, but Arya says Intel investors need to keep the IPO in perspective.

“The planned IPO of 2% of the business doesn’t address the core challenges around 90% of INTC’s core business in PC/Server share losses against AMD/NVDA nor the potential for large capex investments that could pressure INTC’s margins for an extended period of time,” Arya said.

Still, Arya believes the Mobileye IPO is a “smart move to unlock value” given the current market excitement surrounding AV stocks.

Benzinga’s Take: Intel still needs to demonstrate to investors it can keep pace with AMD and Nvidia in next-generation semiconductor technology. However, with Intel stock trading at just 13.7 times forward earnings, additional valuation downside may be limited after the recent pullback.

Also See: Intel CEO Expresses Conviction Over Accomplishing 5-Year Goals At Credit Suisse Conference

Photo: Courtesy of intel.com