Given its strong fundamentals and growth prospects, California-based Marvell Technology, Inc. (NASDAQ: MRVL) may be an attractive investment option for investors seeking access to the US semiconductor market.
The $45.7 billion company is an integrated circuit manufacturer with expertise in digital signal processing, analog, stand-alone, mixed-signal and other types of semiconductor chips. The company also develops processors with one or more cores, hard drives and other products.
At TipRanks, analysts are unanimously bullish on Marvell’s prospects and have a consensus Strong Buy rating based on 20 buys and two holds. MRVL’s average price target of $76.77 indicates a potential upside of 42.93% from current levels.
A few days ago, Tore Svanberg of Stifel Nicolaus reaffirmed a Buy rating on MRVL with a price target of $78 (45.22% upside potential).
Factors affecting the growth of Marvel
The company’s products are widely used in the automotive/networking, data center, enterprise networking, consumer and carrier infrastructure markets. The growing popularity and demand for cloud-optimized silicon is driving this.
Its Serviceable Addressable Devices (SAM) market is expected to grow at a CAGR of 13% to reach USD 30 billion in calendar year 2024 from USD 20 billion in 2021. Business opportunities are believed to be greatest in the automotive/industrial and data center markets.
In addition to the aforementioned tailwinds, the company’s diversified portfolio of products and solutions, technological expertise, customer-centric approach, operational excellence and strong management team enhance its appeal.
Its financial performance has also been good in the last few quarters. The average earnings surprise for the last reported fourth fiscal quarter was 6.6%. For the first quarter of fiscal 2023 (ended April 30, 2022), the company’s earnings of $0.52 per share beat the consensus estimate of $0.51 per share by 2%. Compared to last year, profit increased by 79.3% on the back of a 76.8% increase in profit. High costs, however, played a better part in this quarter.
In May 2022, the company’s president and CEO Matt Murphy said, “We plan to continue growing in the second quarter, forecasting revenue to grow 5 percent sequentially and 41 percent year-over-year on average. With 88 percent of our total revenue coming from data infrastructure, we are confident that our unique global growth drivers in cloud, 5G and automation will continue to drive sustainable long-term growth.”
Conversely, supply chain bottlenecks, cost inflation and labor issues could hurt the company in the coming quarters. In addition, weak demand due to fears of an economic slowdown could be a cause for concern. These obstacles remain significant until the company is fully equipped to address these challenges.
For the fiscal second quarter (ending July 2022), the company forecasts revenue of $1,515 million (midpoint) and adjusted earnings of $0.56 per share (midpoint).
Marvell plans to report results for the second quarter of fiscal 2023 on August 25, 2022 after the market closes. The consensus estimate for Q2 earnings and revenue is $0.56. USD per share and USD 1.52 billion. USA respectively.
Bloggers and hedge funds are optimistic about Marvell’s prospects
According to TipRanks, financial bloggers are 76% positive about MRVL, compared to the sector average of 65%.
Also, hedge funds are very positive on Marvell and grew their stake in the semiconductor company by purchasing 224,000 shares in the last quarter.
Marvel is well entrenched in the United States semiconductor market, as can be seen from its growth trajectory in the chart below. Additionally, the company has a Smart Score of 8, reflecting its potential to outperform the broader market.
The chart also shows that MRVL shares have fallen since the beginning of 2022. The 40% decline in the share price occurred due to macroeconomic uncertainty and industry turmoil. For potential investors, the company’s low price can be used to gain access to the stock.
Read the full Disclosure