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Guilfoyle Marvels at Marvell

Raised growth target at high-end chip maker prompts target price boost.

Holding onto Marvell Technology MRVL was worth it, Stephen “Sarge” Guilfoyle wrote in a recent Real Money Pro column.

While he considered bailing several times last spring, the stock has rewarded his patience, and now appears set for a new growth spurt following an upbeat investors day.

“As time has worn on, it became obvious ... that this firm is key to the data center, which is now expected to drive 40% of revenue generation,” Guifoyle wrote recently on Real Money.

At its recent investors day The company increased its long-term sales growth target to 15% to 20% compared to its previous estimate of 10% to 15%. Marvell Technology also said it plans to return over 50% of its free cash flow to shareholders.

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Based on its most recent data, Marvell produced $751 million in unlevered free cash flow, plus the company has $559 million in net cash during the second quarter along with $785 million in accounts receivable on the books.

The outlook for Marvell looks positive even with the supply chain constraints facing it. CEO Matthew Murphy told CNBC those could persist until the end of 2022 if the current level of demand continues. He also said this would only occur if all end markets reported increases in demand.

Analysts also have a positive outlook for Marvell and the consensus among them is EPS of $0.38 on revenue of $1.15 billion and earnings growth of 40% on sales growth of 53.3% in the current quarter.

The company also remains a popular stock in mutual funds and ETFs - at the end of the most recent quarter, Marvell’s stock was held by 1,743 funds, an increase from 1,387 funds a year ago.

All of which has Guilfoyle raising his target to $80 from $68.

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