Why Marvell Technology (MRVL) Spiked More Than 8%

NEW YORK (TheStreet) -- Marvell Technology (MRVL) spiked 8.5% to $13.03 on Tuesday as investors bought up stock on rumors KRR & Co (KKR) had acquired a 5% stake in the semiconductor developer. Bloomberg reports the investment firm allegedly purchased its position for around $296 million based on Marvell's $5.9 billion market cap as of Monday and could be considering a leveraged buyout.

CEO Sehat Sutardja and his brother Pantas Sutardja, the company's CTO, currently hold 20% ownership, while hedge fund Greenlight Capital owns 9%.

Shares of KKR & Co moved slightly higher, up 0.57% to $23. A spokesperson for KKR declined to speak on the speculation.

At the time of publication, Marvell has not responded to requests for comment. 

TheStreet Ratings team rates Marvell a Hold with a ratings score of C+. The team has this to say about its recommendation:

"We rate Marvell Technology Group Ltd (MRVL) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, MRVL's share price has jumped by 52.02%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • MRVL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.20, which clearly demonstrates the ability to cover short-term cash needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.2%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, Marvell Technology Group Ltd's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $86.50 million or 54.28% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

TheStreet Ratings team rates KKR & CO LP as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate KKR & CO LP (KKR) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, increase in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • KKR's very impressive revenue growth greatly exceeded the industry average of 8.6%. Since the same quarter one year prior, revenues leaped by 70%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 34.69% and other important driving factors, this stock has surged by 45.84% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, KKR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • KKR & CO LP has improved earnings per share by 34.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, KKR & CO LP increased its bottom line by earning $2.23 a share vs. 4 cents a share in the prior year. This year, the market expects an improvement in earnings ($2.44 a share vs. $2.23 a share).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 60.7% when compared to the same quarter one year prior, rising from $127.41 million to $204.74 million.
  • The gross profit margin for KKR & CO LP is currently extremely low, coming in at 0.10%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, KKR's net profit margin of 44.90% significantly outperformed against the industry.

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