Shares of Marvell (MRVL - Get Report) were falling 0.5% Monday morning after Goldman Sachs downgraded the company's rating to neutral from buy on valuation concerns, although the bank also slightly increased its price target for the semiconductor company.
"We believe that our positive view on the stock is now generally shared by investors (consistent with the fact that Marvell has been the best performing stock in our coverage YTD with shares up 60%," analyst Mark Delaney said. "We now see valuation as full. Marvell is trading at 29X NTM Street P/E, which is above the historical average of about 18X, and MRVL is trading at a premium to its peers in particular on P/E (although we believe a premium is justified given the company's long-term growth positioning in 5G)."
The firm now has a $25 price target on the stock, up from $24 per share. On Monday morning, shares were trading at $25.79.
Goldman remains positive on Marvell's fundamentals, however. It believes that Marvell has been under-shipping hard disk drive sell-through, which should help the segment to bottom cyclically. Goldman also sees a bright future for the company in 5G.
"We also believe that Marvell is well positioned to address the 5G processing market which is a multi-billion dollar TAM with its baseband and embedded processors and more recently a design win in the radio head. We are modeling a mid-teens revenue CAGR over the next three years for Marvell's networking segment," Delaner said.
Marvell is a key holding in the Action Alerts PLUS charitable trust.