The bid announcement for the acquisition of Mobileye NV (NYSE:MBLY) by Intel Corporation (NASDAQ:INTC), has put several auto stocks in the limelight given that this deal will give the former a competitive edge in the lucrative driverless car market. INTC plans to acquire MBLY for $15.3 billion, representing a premium of roughly 34% to the closing price on Mar 10.
As technology companies are looking to develop driverless cars and gain an edge over others, demand for auto part suppliers seems to be increasing. Several players in the space perked up on the news as evident from their buoyancy on the market.
Auto stocks that recently gained on the announcement include Delphi Automotive PLC (NYSE:DLPH), Denso Corp (ADR) (OTCMKTS:DNZOY), Visteon Corp (NYSE:VC) and BorgWarner Inc. (NYSE:BWA) with roughly 4%, 2.3%, 5% and 2% addition, respectively.
Blueprint of INTC’s Driverless Initiative
Mobileye, a developer of vision-based advanced driver assistance systems (ADAS), controls a large section of this market. With the acquisition, INTC aims to position itself as a leading technology provider for highly or fully driverless cars. The company expects the vehicle systems, data and services market to be worth $70 billion by 2030.
Anticipating growth in the industry, a number of other companies specializing in the autonomous driving technology and hardware, become viable options for tech giants for mergers or acquisitions. As a result, deals between tech companies, auto manufacturers and auto suppliers have been increasing lately.
In January, Intel acquired a 15% stake in HERE, a digital mapping service, while Daimler AG (OTCMKTS:DDAIF) partnered with Uber Technologies to provide autonomous parts. General Motors Company (NYSE:GM) invested $500 million in ride-hailing company Lyft Inc. and the companies are developing autonomous electric taxis. The company also acquired Cruise Automation — a startup engaged in developing autonomous vehicle software — last year, for $581 million.
Other Self-Driving Plans
A number of companies intend to have self-driving cars on the road by 2020, subject to regulatory approvals. Per CB Insights, a tech market intelligence platform, financing in the auto tech startup sector was over $1 billion in 2016. Growth in this sector is expected to be steep and auto stocks are likely to benefit significantly if the premium for MBLY is any indication.
Auto Stocks to Consider
Against this backdrop, we suggest a few auto stocks with tech exposure that are good buys right now backed by a strong Zacks Rank.
Allison Transmission Holdings Inc (NYSE:ALSN), a manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles, medium- and heavy-tactical U.S. military vehicles and hybrid-propulsion systems for transit buses, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Visteon is an automotive supplier engaged in the design, engineering and manufacturing of innovative climate, electronic, interior and lighting products for vehicle manufacturers. The company also sports a Zacks Rank #1.
Denso Corporation, a global manufacturer and supplier of automotive technology, systems and auto parts, carries a Zacks Rank #2 (Buy). Its automotive supplies include advanced technology, systems and components.
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