Intel (INTC) Takes Another Hit On Slashed Mobileye Valuation With IPO Slated To Launch Next Week

2:37 pm Tuesday, October 18th, 2022

Intel’s (INTC) soon-to-be spun off autonomous driving unit, Mobileye (MBLY), filed an amended IPO prospectus with the SEC, revealing key details about its upcoming offering. The main headline from the new filing is that MBLY is targeting a valuation of about $16 bln, far below expectations and down sharply from the $30 bln figure that INTC had pegged about a month earlier. Further illustrating just how far the IPO market has fallen this year, the projection for MBLY’s valuation was at about $50 bln in late 2021. This downward spiral for MBLY has created yet another drag on INTC’s stock, which has been pummeled by the severe deterioration in the PC/laptop market and the associated plunge in demand for chips.

The prospects of INTC only doing a little better than breaking even on its $15 bln acquisition of MBLY is a very tough pill to swallow, but the ultra-conservative approach with the valuation makes sense. Given the ice-cold conditions in the IPO market, INTC and its investment bankers — including Goldman Sachs (GS) and Morgan Stanley (MS) — want to set a price that will entice as many investors as possible, while limiting the risk of an immediate sell-off following the launch.

Last year, MBLY announced over 40 design wins with major auto OEMs. That design win momentum has continued throughout 2022, leading MBLY to believe that its solutions will be embedded into more than an additional 270 mln vehicles by 2030.

Based on MBLY’s annualized revenue of roughly $1.75 bln for FY22, and its projected $16 bln valuation, the P/S pencils out to about 9.1x. Assuming revenue growth of 20% for FY23, MBLY’s forward P/S drops to about 7.6x. Although we wouldn’t characterize those valuation metrics as dirt cheap, they do seem quite reasonable in light of MBLY’s growth potential.

MBLY’s IPO is a major event not only for INTC, but it will also have significant implications for the overall IPO market. By establishing that low price range, INTC’s investment banking team is hoping that the stock performs well when it opens for trading on October 26. If that scenario unfolds, then other companies sitting on the sidelines waiting to go public will feel more confident about moving forward with their IPOs.