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Marvell shares climb as Oppenheimer raises target, rates it Outperform

EditorAhmed Abdulazez Abdulkadir
Published 2024-05-31, 12:40 p/m

On Friday, Oppenheimer maintained an Outperform rating on Marvell (NASDAQ:MRVL) Technology Group Ltd. (NASDAQ:MRVL) and increased the price target to $90 from the previous $80. The adjustment follows the company's recent financial report, which was in line with expectations.

Marvell's sales in carrier, enterprise, and consumer segments, which represent approximately 23% of the company's revenue, saw a year-over-year decline of about 70% in the first quarter ending in April. However, the outlook for the second quarter ending in July is expected to remain flat, suggesting a potential bottoming out before a recovery in the second half of the year. Management has not forecasted the rate of the anticipated recovery, but historical patterns suggest a possible significant rebound post-correction.

The company is also seeing growth in its artificial intelligence-related business, predicting over $1.5 billion in revenue for the current year, split between custom and electro-optics solutions. Marvell is on track with two major custom compute projects for cloud service providers, believed to be Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL), which are expected to reach a run-rate of over $200 million per quarter by the end of 2024.

Additional wins with Amazon Web Services and a third hyperscaler are anticipated to begin contributing in the coming years, with each project potentially exceeding $1 billion in value.

New product cycles, including the TL10 Top-of-Rack switch, Nova 1.6T PAM4, and 400/800ZR optical solutions, are expected to drive growth in the second half of the year. Despite a 150 basis point decline in gross margins to 62.4% in the first quarter due to product mix, the firm foresees upside momentum as underperforming segments improve and data center orders increase.

InvestingPro Insights

Marvell Technology Group Ltd . (NASDAQ:MRVL) has been under the spotlight following Oppenheimer's positive outlook. InvestingPro data highlights Marvell's significant market capitalization of $66.51 billion, indicative of its substantial presence in the industry. Despite a challenging past year, with a revenue decrease of 6.96%, the company maintains a strong gross profit margin of 41.64%. This resilience is further underscored by Marvell's consistent dividend payments for 13 consecutive years, showcasing a commitment to shareholder returns even in tough times.

InvestingPro Tips suggest that Marvell is poised for a turnaround, with net income expected to grow this year, and analysts predict the company will become profitable within the year. This aligns with the company's forecast of growth in its artificial intelligence-related business and the anticipation of major custom compute projects contributing significantly to revenue. Moreover, Marvell's recent price performance, with a 38.16% return over the last six months, reflects investor optimism about the company's prospects.

For investors looking to delve deeper into Marvell's financial health and future potential, InvestingPro offers additional insights and tips. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 11 more InvestingPro Tips available, investors can make more informed decisions about their investments in Marvell Technology Group Ltd.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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