By Senad Karaahmetovic
Marvell (NASDAQ:MRVL) shares are down about 5% in pre-open Friday after the chipmaker delivered weaker-than-expected third-quarter results and guidance.
Marvel posted an adjusted EPS of $0.57 on revenue of $1.54 billion (+27% year-over-year) to miss the consensus for earnings of $0.59 per share on revenue of $1.56B. The data center revenue came in at $627.3M, higher than the $611.8M estimate.
For this quarter, the midpoint of the range implies EPS of $0.46 on revenue of $1.38B, a significant miss relative to the consensus of $0.62 on revenue of $1.61B. Marvel said it sees its adjusted gross margin for FQ4 at 64%, again lower than the estimated 65.1%.
“Inventory reductions, in particular at our storage customers, are impacting our near-term results and guidance, and we are working closely with them to manage their change in demand in an orderly fashion to clear the path to a resumption of growth,” Marvell said in a press release.
Goldman Sachs analysts said MRVL delivered a “significant re-set” but they remain positive on the stock given its long-term growth profile. The analysts cut the price target to $54 from $62 per share to reflect the ongoing inventory correction.
“We maintain our Buy rating on MRVL as we continue to believe in the sustainability of above-average revenue growth — supported by design wins and content growth across Cloud, 5G infrastructure, and Automotive — as well as the operating leverage inherent to Marvell,” they said in a note.
BMO analysts also cut the price target and commented:
“We were modeling for downward divergence vs. consensus estimates in FY24, and thought that the tightness in the company's major networking products would bide the company some time. We were incorrect in that assumption. The weakness in the storage business is hitting hard, and now. The China networking business is swooning away as well. Our estimates are coming down as is our target, but we are staying with our Outperform.”