Why Marvell Optimism is Warranted

Jeeho Yun and Alex Moreno

Despite an underwhelming August performance from Marvell, we remain optimistic about the eclectic tech company.

Marvell reports earnings Thursday after market-close, and while some investors aren’t expecting great news, analysts from Oppenheimer have come out of the weeds to deliver their two cents. Unlike many who expect MRVL to underperform, analysts are currently advocating for a long position of the stock, as they raised their target price from $35/share to $40.

In addition, Marvell’s bullish thesis may be primarily driven by their 5G networking. While Marvell has taken a “greater-than-expected” hit in their storage business (which represents 37% of total revenue) amidst the coronavirus pandemic, their 5G networking arm remains strong and relatively unhindered by the vast effects of COVID-19.

Furthermore, CEO Matt Murphy hinted toward a positive outlook as previous quarter results were strong, enabled by stronger demand for networking products from the data center and 5G infrastructure end markets. He also mentioned, "While we did experience some COVID-19 supply chain impacts on our storage business in the first quarter, we expect a bounce back in the second quarter and we project our networking business to continue to grow."

We share a similar take on the Bermuda-based company, as the versatility of their products is no small consideration when it comes to growth in the technology sector. According to investment bank Benchmark, Samsung’s 5G infrastructure and Marvell’s custom SSD controller are two key products that should enforce investor confidence, in spite of challenges that may lie ahead.

To add on, although common investors have expressed a bearish outlook for Marvell, multiple investment banks stand by their initial confidence in the multifaceted technology firm, especially given ongoing issues in competitor Huawei. The Benchmark Company and Oppenheimer spell a slow burn in the coming months, and we presume they may be correct.

Not to mention, non-GAAP net income for the first quarter of fiscal 2021 was $118 million, or $0.18 per diluted share and cash flow from operations for the first quarter was $176 million.

Lastly, Marvell just announced an extension of their partnership with TSMC in order to “deliver a comprehensive silicon portfolio for the data infrastructure market leveraging the industry's most advanced 5 nanometer process technology.” This news is extremely well received, as “next generation technology” has never been more important, especially given the circumstances.

Disclosure: At the time of publication, we have no positions in any of the securities mentioned in this article. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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Comments (5)
No. 1-5
JavierFrausto
JavierFrausto

5G, 5G, 5G!

JPotts
JPotts

5G is the next big thing! Mark my words

ZevF
ZevF

Have to invest in 5G!!! Going to make so many tech trends, like full cloud computing and autonomous driving possible!

kperkins2
kperkins2

Great move! A lot of companies are starting to shift towards the 5G upgrade cycle.

kdriscoll
kdriscoll

Editor

5G is big. Bullish on Marvell