Jefferies downgraded to Hold & raised its PT to $63.54 following Intel Corporation's announced acquisition of Mobileye NV (NYSE:MBLY). While Jefferies continues to favor Mobileye as the market leader in the rapidly growing ADAS & autonomous vehicle segments, the firm believes Intel represents the likely high bidder as size ($15B all cash ~ $63.54 per share) likely precludes a majority of alternative bidders while synergies & historical collaboration point to Intel as the best "strategic fit" acquirer.
Intel and Mobileye jointly announced Intel's proposed acquisition of Mobileye for $15B ($63.54 per share). The deal is expected to close in 9 months. Intel's Automated Driving Group will be integrated into MBLY with headquarters remaining in Israel while Mobileye's leadership team will continue to run the operation.
Jefferies believes the combination will provide a solid single solution to customers as Mobileye's vision and REM technology combined with Intel's computing, data center, AI & connectivity expertise should ultimately simplify the active safety product development cycle. Jefferies believes Mobileye's leadership position in ADAS (est. 65% market share), significant REM opportunity & a robust addressable market (estimated $70B) coupled with Mobileye & Intel's longs-tanding relationship (collaborations with DLPH and BMW) drove the deal & price premium (118x TTM EBITDA, 42x JEF 2018E).
The firm continues to believe a longer term, mass market rollout of autonomous vehicles will provide opportunities for multiple suppliers as OEM's scale active safety technology (est. 30-40% for traditional supplier market share leaders) & estimate MBLY will remain a leading player in the space. Jefferies believes the deal could improve REM's positioning as the mapping solution provider of choice for a majority of OEMs given Mobileye's early ADAS penetration & mileage opportunity as well as Intel's cloud & data center capabilities.
Our $63.54 PT is in line with the announced all cash offer of $63.54. We note our $63.54 PT represents 1.8x forward PEG ratio (1.7x ex-cash), a 36% premium to Mobileye's 3 year median multiple (1.3x) vs. auto "disrupter" valuation of 2-4x. Key risks include competitive & event driven risk.
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