The Intel-Mobileye Deal Caused This Analyst To Downgrade Sirius XM

Intel Corporation INTC has agreed to acquire Mobileye NV MBLY for $15.3 billion.

This move is “just the latest affirmation that autonomous cars are quite real with attendant eventual implications for a proliferation of in-car entertainment,” Wunderlich’s Matthew Harrigan said in a report.

Harrigan downgraded the rating on Sirius XM Holdings Inc. SIRI from Buy to Hold, commenting that he was “reluctantly moving to the sideline.” He raised the price target from $5.00 to $5.50.

Long-Term Intact

Mobileye is a vision technology leader with advanced system-on-chip, or SoC, products. The analyst pointed out, however, that Sirius XM’s long-term prospects were protected by the company’s “engineering development integration with OEMs [original equipment manufacturers], large installed base, exclusive sports and talk content rights, and long tail on traditional car ownership.”

Related Link: Intel Inherits Mobileye's Problems

Harrigan explained that truly autonomous cars needed to integrate hardware and software, particularly “sensors, braking, cognitive AI [artificial intelligence] elements including neural networks, etc.” Providing more entertainment options in the car, including video and social media, is “a clear major priority” for traditional global OEMs as well as new entrants.

Thus, Sirius XM would need to adapt to “major technology flux within the vehicle, although its embedded engineering relationships with automotive OEMs confer a significant advantage,” the analyst stated.