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On Tuesday, Marvell Technology Group Ltd . (NASDAQ:MRVL) maintained its Overweight rating and a price target of $125.00, following the announcement of the sale of its Automotive Ethernet business to Infineon Technologies AG (OTC:IFNNY) for $2.5 billion in cash. The transaction is expected to close sometime in calendar year 2025. According to InvestingPro data, 20 analysts have recently revised their earnings estimates upward, with analyst targets ranging from $66 to $140, reflecting strong confidence in the company's strategic direction.
Stifel analysts highlighted Marvell's strategic focus on Artificial Intelligence (AI), emphasizing Custom Silicon and Networking. The sale of the Automotive Ethernet unit aligns with the company's direction, as this division was becoming less central to Marvell's core business. Analysts noted that the sale price, at 10-11 times the projected sales, was appropriate given the expected revenues of $225-250 million in calendar year 2025. The company's current revenue stands at $5.77 billion, with a healthy current ratio of 1.54, indicating strong operational efficiency.
The divestiture's impact on Marvell's financial model was assessed, with an estimated gross margin/operating margin of 60%/35% leading to a potential EPS headwind of approximately $0.10. However, the infusion of $2.5 billion in cash is expected to at least neutralize this impact. The analysts suggested that Marvell might leverage the cash to execute aggressive stock buybacks, especially considering the recent significant pullback in its share price.
The transaction is seen as a positive step for Marvell, both financially and strategically, as it continues to sharpen its focus on the AI data center market. The company's decision to divest a non-core business component is in line with its stated goal of being an AI-first organization, and the substantial cash proceeds provide additional flexibility for future strategic initiatives. InvestingPro analysis suggests the stock is currently undervalued, with analysts expecting significant sales growth and profitability in the current year. For deeper insights into Marvell's valuation and growth prospects, including 16 additional ProTips and comprehensive financial metrics, explore the full Pro Research Report available on InvestingPro.
In other recent news, Marvell Technology has announced the sale of its Automotive Ethernet business to Infineon Technologies for $2.5 billion. This transaction, which includes the Brightlane Auto Ethernet portfolio, is expected to be completed within the 2025 calendar year, pending regulatory approvals. Analysts at Raymond (NSE:RYMD) James have maintained an Outperform rating for Marvell, with a price target of $110, viewing the sale as a strategic move that allows Marvell to focus on its core Data Center operations. The divestiture is projected to generate $225-250 million in revenue for fiscal 2026, contributing to Marvell's strategic shift towards data infrastructure solutions.
Additionally, Marvell has introduced new advancements in data infrastructure technology, unveiling the industry's first 1.6T PAM4 DSP for Active Electrical Cables (AECs) and an 800G version, which are designed to enhance data center performance. These developments align with the growing demand for AI, machine learning, and cloud computing services. Marvell's recent initiatives underscore its commitment to strengthening its data infrastructure business. The company has collaborated with partners such as 3M and TE Connectivity (NYSE:TEL) to demonstrate these solutions, further emphasizing its focus on connectivity advancements.
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