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Stock Analyst Update

Intel-Mobileye Hookup: Synergies Offset by High Price

We applaud the strategic rationale of the deal, given Mobileye’s existing portfolio of computer vision products found in vehicles on the road today.

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On March 13,  Intel (INTC) announced it intends to acquire  Mobileye (MBLY) for approximately $15.3 billion to bolster its efforts in the burgeoning autonomous driving market. We applaud the strategic rationale of the deal, given Mobileye’s existing portfolio of computer vision products found in vehicles on the road today. As current technology progresses from basic advanced driver assistance systems (emergency braking, lane departure warnings, adaptive cruise control, and so on) to fully autonomous platforms, customers will require end-to-end solutions from the vehicle to the data center. While the joint entity will be better suited to address challenges associated with achieving self-driving cars, our initial reaction to the acquisition is that the expected synergies will be effectively offset by the 34% premium to the March 10 close that Intel is paying for Mobileye's shares. Still, the deal price of $63.54 per share represents a modest 16% premium to our $55 fair value estimate for Mobileye. Consequently, we are maintaining our fair value estimate of $31 for wide-moat Intel at this juncture.

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Abhinav Davuluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.