Shares of Mobileye Global Inc. soared to their highest levels in nearly two years after Intel Corp. announced that it currently has no plans to sell its majority stake in the autonomous driving technology company. This decision helped ease investor concerns about a potential selloff, which had been weighing on the stock.
Intel, which holds an 88% stake in Mobileye, released a statement on Thursday confirming that it is not planning to divest its majority interest in the company. This news triggered a rally, sending Mobileye’s shares up as much as 19% to $13.79 in New York trading, marking the largest intraday gain since October 2022.
“We believe in the future of autonomous driving technology and in Mobileye’s leadership role in advancing driver assistance systems,” Intel stated. This comes as Intel’s CEO, Pat Gelsinger, continues to revamp the company’s operations, which have struggled in recent years. Gelsinger’s latest initiatives include pausing factory construction in Germany and Poland, and reorganizing Intel’s manufacturing division into a wholly owned subsidiary.
Earlier this month, reports emerged that Intel was exploring strategic options for its Mobileye stake, potentially offloading a portion of it in the public market or selling it to a third party. These reports created uncertainty around Mobileye, putting downward pressure on the stock.
Mobileye, which specializes in software and hardware solutions for autonomous driving systems, was originally acquired by Intel in 2017 for $15 billion. Despite taking the company public in 2022, Intel has held on to most of its stake. However, Intel did sell some shares last year, raising around $1.5 billion in the process.
Mobileye’s market value currently stands at approximately $11 billion, meaning Intel would incur a loss if it sold its stake at current levels.
Both Intel and Mobileye have faced challenges this year. Mobileye’s stock had plummeted 73% before Thursday’s rally, driven by weaker production targets from automaker clients, particularly in China. The company had also slashed its forecasts last month, deepening investor concerns.
“Intel’s decision to retain its majority stake in Mobileye removes a significant overhang for the stock, especially given Intel’s financial challenges,” said Jake Silverman, an analyst at Bloomberg Intelligence. However, Silverman noted that the wording of Intel’s statement leaves the door open for a potential sale in the future.
For investors, Intel’s decision provides a sense of stability for Mobileye in the near term. Yet, the company still faces headwinds from both global macroeconomic factors and the slowdown in the automotive sector, particularly in China. Investors with a long-term view could see this as an opportunity to enter at a lower price point, given the potential for recovery as demand for autonomous driving technology grows globally.
Analysis:
Intel’s decision to hold onto its Mobileye stake signals confidence in the future of autonomous driving, an industry expected to experience long-term growth. This move offers a near-term relief for investors, removing the uncertainty that had weighed heavily on Mobileye’s stock. For investors, this presents a window of opportunity.
Mobileye operates in a growing sector, and its role in developing advanced driver assistance systems (ADAS) positions it favorably for the future. However, current macroeconomic challenges, particularly in China, where many automakers have pulled back on production, will likely continue to impact Mobileye’s short-term performance.
For investors looking for exposure to the autonomous driving space, Mobileye could offer significant upside if it can navigate the current environment successfully and capitalize on the long-term potential of the sector. This surge in the stock could also represent a turning point, especially if automakers ramp up production and Mobileye continues to innovate.
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