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Intel Stock Surges On Plans For Potential $50 Billion Mobileye IPO

Intel plans to list Mobileye, the self-driving car division is purchased in 2017, sometime next year in a deal that could value the group at around $50 billion.

Intel Corp.  (INTC) - Get Intel Corporation Report shares powered higher in pre-market trading after the chipmaker unveiled plans to list Mobileye, its self-driving car division sometime next year.

Intel, which bought Israel-based Mobileye for $15.3 billion in 2017, will retain a majority holding in the group, but noted that a listing is the "best opportunity to build on Mobileye's track record for innovation and unlock value for shareholders."

With reports suggesting a market value of around $50 billion for Mobileye, the cash infusion for Intel from the listing will go a long way towards funding its ambitions to boost its chip manufacturing, which it detailed earlier this year with plans to invest $20 billion to build two new factories in Arizona as it takes on Samsung and Taiwan Semi TSMC in the global semiconductor market.

“Intel’s acquisition of Mobileye has been a great success," said CEO Pat Gelsinger. "Mobileye has achieved record revenue year-over-year with 2021 gains expected to be more than 40% higher than 2020, highlighting the powerful benefits to both companies of our ongoing partnership."

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Intel shares were marked 3.8% higher in early Tuesday trading to change hands at $52.93 each, a move that would trim the stock's six-month decline to around 4%.

Mobileye generated around $967 million in revenues last year, and have grown by around 24% each year since Intel's 2017 purchase. BMO Capital Markets analyst Ambrish Srivastava, who carries a 'market perform' rating with a $52 price target on the stock, estimates 2021 revenues in the region of $1.4 billion.

"While (the listing plan) marks an u-turn in terms of the strategic rationale that Intel laid out when it acquired the company, the transaction somewhat makes sense as it would provide Intel with much-needed cash to fund its ambitious foundry investments," Srivastava said. "Mobileye is really too small relative to Intel to make a dent in the overall business as part of the company."  

Intel's posted weaker-than-expected third quarter earnings of $1.71 per share in late October, on sales of $18.1 billion, adding that its newer, faster chips would be less profitable in the early phase of their release and cautioning that profit margins would fall to between 51% and 53% over the next three years.  

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