Mobileye stock skyrocketed on Monday after the company announced that Intel is acquiring it for about $15 billion. Many analysts downgraded the company’s shares to Neutral or the equivalent because of the sudden increase, which brought them close to the per-share price Intel is paying for it.
Mobileye stock downgraded for probable lack of a bidding war
In a research note dated March 14, Jefferies analyst David Kelley said he downgraded Mobileye stock from Buy to Hold, although he also boosted his price target in the same note, raising it from $58 to $63.54, which is the per-share buyout price Intel is paying, all in cash. He still sees Mobileye as the “market leader” in autonomous vehicle technology, but he doesn’t believe another suitor that’s willing to pay more for the company will emerge.
He downgraded Mobileye stock to Hold because of the size of the transaction and the “already limited strategic bidder base” for the company. He does see Intel as the best fit for ADAS firm, however, based on their longstanding relationship. He also feels that Intel could help boost the positioning of the company’s REM technology.
Intel a good strategic fit
JPMorgan analyst Samik Chatterjee already had a Neutral rating on Mobileye, so he simply reiterated that and boosted his price target from $50 to $63.50. He said in his March 14 note that he feels Intel is a “good strategic fit” for the company and called the deal a “positive for ‘techy’ suppliers.” He said the rich multiple is positive not only for Mobileye but also other high-tech auto parts suppliers, including Autoliv and Sensata.
He also said that he has long felt that the chip maker would eventually acquire the ADAS firm. Like Kelley, he doubts another suitor will rise to challenge Intel because of the rich multiple. He doesn’t expect regulators to oppose the acquisition.
Evercore ISI analyst Chris McNally also downgraded Mobileye stock, moving to In Line, although he emphasized in his March 13 note that he still sees the company as the dominant force in levels two and three autonomous driving tech.
Mobileye deal makes DB like Delphi even more
Most analysts seem to agree that Delphi is the big winner from the deal with Intel, as it is the Tier 1 player that’s closest to the chip maker and Mobileye. Deutsche Bank analyst Rod Lache said in his March 14 research note that the deal makes him like Delphi even more than he already did. He noted that Delphi is the company’s main Tier 1 partner for autonomous driving systems. He feels that Delphi’s Powertrain segment is especially underappreciated and that unlocking the value inherent in the segment “would also create a pure play in Electronics and Electronic Architectures, which would be noteworthy for Financial and Strategic players alike.”
McNally added that Delphi is probably also the biggest market share provider of Mobileye’s levels two and three customer awards and probably a big supplier of the company’s level four awards. He also sees Valeo as a secondary winner from the deal, as it’s gone from 0% in the ADAS segment to 25% of Mobileye’s award share with customers like Volkswagen and possibly Nissan and Honda. He named Conti and ALV as “relative losers,” as they don’t work with Mobileye and, with Intel’s involvement as owner of the company, they stand little chance of catching up.
Shares of MBLY closed up 0.56% at $60.96 on Tuesday, while Intel stock closed up 0.03% at $35.17.