Why Intel, Alphabet, and Mobileye Stocks All Soared Today

Thursday seems like a great day to own stocks, and especially tech stocks — especially tech stocks that have to do with self-driving cars. If you own stocks in Mobile phone (MBLY -7.90%) or Alphabet (GOOG 0.30%) (GOOGL 0.32%) today you have Intel (INTC 5.06%) to thank.

Oh, sure. A lot of the stocks that are up today are up because of the 50 basis point rate cut by the Federal Reserve yesterday. That’s a big catalyst. But a second catalyst, and one that’s specific to the self-driving car industry, is the fact that Intel announced today that it has no plans to sell its majority stake in Mobileye.

That news is driving the surprising strength in shares of Intel (up 3% through 11:10 a.m. ET), Alphabet (up 1.8%) and especially Mobileye, which is up 15.3%!

What Intel Said About Mobileye

Earlier this month, both Intel and Mobileye were hit by rumors that the semiconductor giant was planning to sell the bulk of its 88% stake in Mobileye, which makes machine vision systems for electric cars.

Today, Intel said the opposite is closer to the truth. “We believe in the future of autonomous driving technology and Mobileye’s unique role as a leader in the development and deployment of advanced driver assistance systems,” Reuters quoted the tech giant as saying. And assuming Intel is telling the truth, that means the company sees value in owning a piece of the self-driving car industry.

That’s good news for Mobileye investors, who now don’t have to worry about a flood of their shares being put up for sale, sending the stock price down even further than it’s already fallen this year (73%). It should also be good news for Alphabet, which in July announced plans to invest another $5 billion in its Waymo self-driving car venture — despite reports that Waymo cost it $1.1 billion in losses in Q2.

And if Intel makes the right decision by keeping Mobileye, that could actually be good news for Intel.

Is Mobileye Stock a Bargain?

Intel could of course do that Real could use some good news now, after reporting declining revenue and a $1.6 billion net loss (and $3.4 billion in cash burn) in its Q2 report. With less than $1 billion in profit over the past 12 months to support its $89 billion market cap, Intel’s hope that Mobileye, which is also loss-making but generates free cash flow, can become a profit center going forward is a bet that could pay off better.

The good news is that this is possible.

Analysts surveyed by S&P Global Market Intelligence don’t expect Mobileye to report profits under generally accepted accounting principles (GAAP) before 2026. But the self-driving car unit is already generating substantial free cash flow, with earnings expected to hit $435 million next year. At a market cap of $9.4 billion, that doesn’t exactly make Mobileye stock “cheap.” But a price-to-free cash flow ratio of 22 isn’t an unrealistic valuation. And with free cash flow expected to triple in the three years following 2025, Mobileye actually seems like an asset Intel should hold onto.

Are you looking for a good stock to buy and invest in the self-driving car revolution? Then Mobileye stock might be right up your alley.