MobilEye Stock Plunges as Intel Considers Stake Sale

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Shares of MobilEye Global (MBLY) took a significant hit on Friday, slumping over 8% in after-hours trading, following reports that Intel Corporation (INTC) is considering selling a portion of its nearly 88% stake in the company. This move comes as Intel looks for ways to bolster its financial standing amid ongoing challenges. Both companies have struggled recently, with shares hitting record lows and concerns about their future outlook.

MobilEye (MBLY), a leading provider of hardware and software solutions for self-driving vehicles, has faced a turbulent year. The company's stock is down approximately 71% year-to-date, driven by broader market struggles and specific issues within the automotive industry. Automakers have been reducing production to manage inventory gluts, which has significantly impacted MobilEye’s sales. The company recently slashed its revenue forecast and lowered its adjusted operating income projections, pointing to continued financial difficulties.

Intel, MobilEye's majority stakeholder, is also grappling with severe financial pressures. With shares trading at their lowest levels in over a decade, Intel CEO Pat Gelsinger is exploring various strategic options, including asset sales and potential mergers and acquisitions (M&A). Intel's recent financial performance has been dismal, with a net loss of $1.61 billion last quarter. The company is now considering selling parts of its stake in MobilEye, a decision that could be influenced during a board meeting in New York later this month.

This potential sale is part of Intel's broader strategy to simplify its operations and focus on creating value for shareholders. Intel has already sold a portion of its MobilEye stake, raising $1.5 billion last year. However, the timing of the proposed sale is less than ideal, given MobilEye's steep decline in market value, currently estimated at $10.2 billion.

Technical Analysis
On the technical front, MobilEye's stock is displaying signs of extreme bearishness. As of Friday's after-hours trading, MBLY was down 8.48%, with the Relative Strength Index (RSI) plummeting to 24, indicating that the stock is currently in oversold territory. The RSI is a key momentum indicator used to assess whether a stock is overbought or oversold. A reading below 30 suggests that the stock may be due for a short-term bounce, but with such overwhelming negative sentiment, any recovery might be limited.

Additionally, the price chart reveals a downward trend with no immediate signs of reversal. The stock has broken several support levels, and the bearish momentum suggests further downside could be on the horizon. If the RSI remains low, MobilEye could see a temporary technical bounce; however, the broader fundamental challenges and market conditions will likely continue to weigh heavily on its performance.

The selling pressure on MBLY is further exacerbated by Intel's reported plans, creating a volatile situation for the stock. Intel’s decision to sell part of its stake could place additional downward pressure on MBLY as the market digests the increased supply of shares. The current technical setup, coupled with the broader bearish narrative surrounding both companies, makes MobilEye a highly risky investment at this juncture.

Conclusion
MobilEye’s recent price action reflects a complex blend of technical oversold conditions and deteriorating fundamentals. The company's financial struggles, coupled with Intel’s potential divestment, have created a perfect storm of negative sentiment. While short-term technical factors like the low RSI suggest a potential bounce, the longer-term outlook remains bleak unless there is a significant change in the company's fortunes or market conditions.

Investors should keep a close watch on Intel's decisions and upcoming board meetings, as any further announcements could have a substantial impact on MobilEye's stock performance. For now, MBLY remains a stock to watch cautiously, with the potential for continued volatility in the weeks ahead.