2 Wall Street analysts have completely different views on Intel's most recent acquisition (INTC, MBLY)

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March 15, 2017 7:43 PM

Intel agreed to buy Mobileye for $15.3 billion, or $63.54 a share.

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On Monday, semiconductor giant Intel (INTC) acquired Israeli start-up Mobileye (MBLY), which makes autonomous vehicle sensor technology, for $15.3 billion, or $63.54 a share. The deal represented a 34.5% premium to Friday's closing price.

Analysts are split on the benefits of the move.

Stephen Chin at UBS cheered the acquisition, saying it "provides a path for further P/E multiple expansion from sales diversification into the fast growing autonomous driving (AD) market, positions Intel as a broader ecosystem play, and could drive margin expansion." UBS maintained its a buy rating and a $42 price target. The bank added it likes "how Intel is transforming the company into a diversified business that can grow faster than the 'low-single digits %'."

On the other hand, Credit Suisse downgraded the stock to neutral and slashed its price target from $45 to $35. Credit Suisse approves of the acquisition but thinks that the short-term costs of such a major and expensive (29x 2017 sales) acquisition cannot be ignored. With Intel already trading at a premium to its peers and slim growth prospects, the investment bank just cannot find the justification to keep an outperform rating on this stock.

It's important to note that Intel has a history of acquisitions gone terribly wrong but Intel CEO Brian Krzanich argued that Mobileye would be different:

Since the deal, Intel's stock is down $1 or 2.5% to about $35 a share.

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