Marvell
Marvell
Technology stock was dropping Friday as investors digested its latest earnings report. The semiconductor company’s earnings and guidance, reported Thursday, looked to have disappointed the market but analysts remained confident that Marvell will gain from investments in artificial intelligence.
Marvell
slid 5.5% in early trading to $52.68 Friday, the day after the company forecast fiscal fourth-quarter revenue to be roughly flat compared with a year ago. That’s set to put a dent in the stock’s 50% rise this year, through Thursday’s close.
But analysts were upbeat, primarily on the artificial intelligence opportunity.
“Marvell [is] uniquely positioned in data-center AI with electro-optics, switching, storage and custom ASIC [chips]. We see sales accelerating into ‘24 led by multiple new product cycles and share/content gains,” wrote Oppenheimer analyst Rick Schafer following the earnings report.
Schafer reiterated an Outperform rating and $70 target price on Marvell stock.
Marvell—which designs data storage and networking chips—was boosted earlier this year when it said it expected AI-related revenue to be around $400 million in its current fiscal year and double again the next fiscal year.
“We see sustained growth in the data-center business going forward, with the remaining portion of the business contributing to growth in the middle of FY25,” wrote Piper Sandler analyst Harsh Kumar in a research note following the earnings report.
Kumar reiterated an Overweight rating on the stock but lowered his price target to $70 from $75.
Marvell earned an adjusted 41 cents a share for the October quarter, down 28% from the same period a year earlier. Sales came to $1.42 billion, down 8%. Analysts polled by FactSet had expected earnings of 40 cents a share on sales of $1.4 billion.
Marvell forecast adjusted earnings in the fourth quarter of 46 cents a share on sales of $1.42 billion, the midpoint of its guidance. Analysts had been looking for earnings of 49 cents a share on sales of $1.46 billion.
While Marvell is still being hit by depressed demand for data-center storage compared with previous years, the company noted its third-quarter data-center revenue was up 21% from the preceding quarter. It also said it expects AI-related revenue in the fourth quarter to come in significantly above its previous forecast of a $200 million run rate heading into the new year.
Raymond James analyst Srini Pajjuri lowered his target price to $62 from $64 but kept an Outperform rating on the stock. The target is based on a price-to-earnings multiple of 31 times Marvell’s projected earnings for fiscal 2025.
“We believe a premium [valuation] is appropriate given depressed estimates, growing AI exposures, and double-digit longer term growth potential,” Pajjuri wrote.
Write to Adam Clark at [email protected]
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