Intel (INTC, Financial) may be poised for significant changes to accelerate its turnaround, but selling part of its Mobileye (MBLY, Financial) stake isn't one of them.
On September 5, it was reported that INTC was considering selling a portion of its 88% ownership stake in MBLY, causing MBLY shares to drop, with a year-to-date loss of 76% by September 12. However, INTC later stated that it has no plans to divest a majority interest in MBLY and is enthusiastic about the future of autonomous driving and MBLY. This news caused MBLY shares to spike, erasing the early September losses.
- INTC's commitment is positive for MBLY, but challenges remain. MBLY recently lowered its FY24 revenue guidance to $1.60-$1.68 billion from $1.83-$1.96 billion and adjusted operating income forecast to $152-$201 million from $270-$360 million.
- While excess inventory issues in North America and Europe are largely resolved, MBLY faces significant headwinds in China. During the Q1 earnings call, MBLY revealed a decline in orders for 2H24 from Chinese OEMs, with core customers experiencing share losses in China.
- SuperVision volumes for the second half are expected to be lower than initially projected due to increased U.S. and European tariffs on Chinese-produced vehicles. MBLY now expects FY24 SuperVision volume of 110,000-130,000 units, down from the previous estimate of 175,000-195,000 units.
- Given MBLY's struggles and depressed stock price, it's logical that INTC wouldn't sell now. Additionally, INTC is exploring options for its Network and Edge (NEX) business, which could attract more interest. In Q2, NEX's revenue was flat year-over-year at $1.34 billion, while operating income rose 117% year-over-year to $139 million.
The main takeaway is that INTC's decision to retain its majority stake is a relief for MBLY shareholders, but MBLY's outlook remains clouded by significant challenges in the Chinese market.
