Marvell Technologies (MRVL) is a giant technology company valued at almost $60 billion. It manufactures semiconductors that are widely used by large tech firms like Amazon, Microsoft, IBM, and Google. Most of its revenue - $2.2 billion in 2023 - comes from its data center business.
Marvell also manufactures other items like in the enterprise networking, carrier infrastructure, consumer, automotive, and industrial segments. The four segments made over $1.2 billion, $1.05 billion, $622 million, and $388 million in 2023, respectively.Â
Marvell has a large portfolio of products that form the backbone of the tech industry. Some of its top solutions are its custom application-specific integrated circuits (ASICs), fibre channel adopters, electro-optics, and storage controllers.Â
In addition to data center and cloud customers, Marvell also provides its solutions to companies in the networking sector like Cisco and Juniper, storage providers like Western Digital, and consumer electronics like Samsung. As a result, because of its solutions, Marvell is not a household name.
Marvell Technologies went public at the height of the dot com bubble in 2000. Since then, its stock has jumped by over 383%, underperforming most tech companies.Â
Marvell shares were trading at $68.93 on Sep. 10 while the HypeIndex score rose by 180%.
Positive hype
Marvell Technologies has attracted positive hype after publishing better-than-expected financial results. While its revenue dropped by 5% YoY to $1.27 billion, it was higher than the median estimate of $1.26 billion.Â
The company is benefiting from the ongoing demand of data centers as the artificial intelligence (AI) hype continues. Other large companies in the AI space like Nvidia, Microsoft, and Alphabet published strong results.
Analysts believe that the data center segment will continue doing well because of the massive scale of the generative industry. In Marvell’s case, the segment accounted for 69% of its total revenue.
The company is also capturing market share in the networking industry, which accounts for about 12% of its total sales.Â
Most importantly, Marvell has continued to reduce its inventories. In the last quarter, it reduced its inventories by about 20% or $198 million. Like other companies in the sector, Marvell increased its inventories following the strong demand during the Covid-19 pandemic.Â
Marvell has continued to return cash to investors. It repurchased shares with $175 million in the last quarter and paid $52 million in dividends. Share repurchases are important because they help to boost a company’s earnings per share (EPS).
Negative hype
Marvell has also attracted some negative hype among investors.
Marvell has underperformed the market in the past few years. Its total return in the past three years has been 14%, much lower than the Invesco QQQ’s 22%.Â
The company’s revenue growth has been muted in the past few years, underperforming the broader market. Its revenue also stood at $5.5 billion in the last financial year, down from $5.9 billion in the previous year.Â
Marvell Technologies has also been a loss-making company for a while. It moved from a net profit of over $1.5 billion in 2019 to a loss of over $965 million in the trailing twelve months.
Marvell is also a highly overvalued company considering that it has a market cap of over $59 billion. It has a price-to-sales multiple of 10, much higher than the industry median of 2.7.Â
Its forward price-to-earnings ratio of 46, is also higher than the sector median of 22.3 even though its revenue growth is not all that strong. Nvidia, which is seeing a strong revenue growth, has a multiple of 46.5.Â
The company could also come under pressure if the data center division starts slowing down since it accounts for over 60% of its total revenue.
Summary on Marvell stock
Marvell Technologies stock has moved sideways in the past few months. It has remained at the key resistance point at $70 for a while. The stock has remained above the 50-week and 100-week Exponential Moving Averages (EMA).Â
Therefore, the outlook for the stock is relatively neutral for now as investors wait for the next catalyst. The average estimate among analysts is that it will rise to $92, much higher than the current $68. A move to that level would bring its valuation to over $109 billion, which is fairly expensive.
If you’d like to receive more trending stocks straight to your inbox, check out our premium plans. Alternatively, if you’d like to hear more about the services offered by HypeIndex, you can check out our FAQ page.
HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.
Comments