Intel to Re-IPO Mobileye, Which Could Fuel Chipmaking

On Dec. 6, Intel INTC announced it is looking to publicly list shares in its Mobileye self-driving automotive unit in mid-2022. The relisting could value Mobileye at north of $50 billion, according to a report by The Wall Street Journal. Intel will maintain majority ownership of Mobileye, which we think is prudent. Of the various acquisitions Intel has made in recent years, we were most positive on Mobileye, which Intel acquired in 2017 for $15.3 billion. Mobileye is the market leader in advanced driver-assistance solutions, or ADAS, and has compelling technologies for self-driving cars. We estimate Mobileye's 2021 revenue will be about $1.4 billion versus a little under $500 million in 2017. Although we think Mobileye has rosy growth prospects, we think this capital allocation decision to unlock value via an IPO for the ADAS leader is a wise move for Intel as it will allow them to focus more on its core chip design and manufacturing business as well as its foundry aspirations. Shares of Intel were up 8% during after-hours trading as we think investors agreed with this sentiment. Our fair value estimate for wide-moat Intel remains $65 per share, and we believe long-term investors should find shares attractive at current levels. In 2020, Mobileye shipped 19.3 million EyeQ chips versus 2.7 million in 2014, which represents a 39% CAGR. Ingrained in Mobileye's strategy is developing scalable solutions, with its future EyeQ processors poised to incrementally approach Level 5 autonomy. We believe Mobileye is well-suited to capitalize on the autonomous driving opportunity, given its strategy for scalability and real-time map development. Furthermore, we like that Mobileye's founder Professor Amnon Shashua will remain as the firm's CEO, as it should allow for a seamless transition. Intel's future foundry service could also make chips for Mobileye in the future (TSMC is Mobileye's current foundry). We expect more details on the decision on Dec. 7 at a webcast held by Intel.

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