Story Stocks®
Updated: 19-Sep-24 11:43 ET
Mobileye drives higher after Intel reaffirms majority stake, but China-based headwinds linger (MBLY)
Intel (INTC) may be ready to make some major changes in order to hasten a turnaround that has faltered under its foundry-based strategy, but selling off part of its Mobileye (MBLY) stake isn't one of those changes that's in the cards.
On September 5, Bloomberg reported that INTC was considering selling off a portion of its 88% ownership stake in MBLY, sending shares of the ADAS chip maker spiraling lower to trade with a year-to-date loss of 76% by September 12. Earlier this morning, however, INTC released a statement, saying that it has no plans to divest a majority interest in the company and that it's excited about the future of autonomous driving and of MBLY. The news has MBLY spiking sharply higher and erasing those losses from early September.
On September 5, Bloomberg reported that INTC was considering selling off a portion of its 88% ownership stake in MBLY, sending shares of the ADAS chip maker spiraling lower to trade with a year-to-date loss of 76% by September 12. Earlier this morning, however, INTC released a statement, saying that it has no plans to divest a majority interest in the company and that it's excited about the future of autonomous driving and of MBLY. The news has MBLY spiking sharply higher and erasing those losses from early September.
- The commitment from INTC is certainly good news for MBLY, but the road ahead is still very bumpy. MBLY is coming off a very discouraging Q1 earnings report in which it slashed its FY24 revenue guidance to $1.60-$1.68 bln from its prior outlook of $1.83-$1.96 bln, and its adjusted operating income forecast to $152-$201 mln from $270-$360 mln.
- While the excess inventory situation at MBLY's tier one customers in North America and Europe is mostly in the rearview mirror, the company is now facing significant headwinds in China. During the Q1 earnings call, MBLY disclosed that it has seen a decline in orders for 2H24 from Chinese OEMs and that its core customers are experiencing continued share losses in China.
- From a product standpoint, second half volumes for SuperVision -- an ADAS that combines multiple sensors, cameras, radar, computer vision, and machine learning -- are expected to be lower than originally projected due to increased U.S. and European tariffs on Chinese-produced vehicles. After previously guiding for FY24 SuperVision volume of 175,000-195,000 units, MBLY is now expecting units of 110,000-130,000.
- Given MBLY's current struggles and depressed stock price, it makes sense that INTC wouldn't want to sell now. It's worth noting that Bloomberg also reported that INTC is weighing options for its Network and Edge (NEX) business. That business, which makes processors, SoCs, network adapters, and wireless connectivity devices, would likely draw stronger interest than MBLY. In Q2, NEX's revenue was essentially flat yr/yr at $1.34 bln while operating income increased by 117% yr/yr to $139 mln.
The main takeaway is that INTC's commitment to retaining its majority stake comes as a relief to MBLY's shareholders, but the current fundamental picture for MBLY remains clouded by a substantial downturn in the Chinese market.
