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On Tuesday, Raymond (NSE:RYMD) James maintained a positive outlook on Marvell Technology Group Ltd . (NASDAQ:MRVL), reiterating an Outperform rating and a $110.00 price target. According to InvestingPro data, the stock currently trades at $51, with analysts' targets ranging from $66 to $140, suggesting significant upside potential. The company's stock has experienced volatility recently, declining about 19% in the past week. The affirmation followed Marvell's announcement that it has agreed to sell its Automotive Ethernet business to Infineon Technologies AG (OTC:IFNNY) for $2.5 billion in cash. The transaction includes the divestiture of the Brightlane Auto Ethernet portfolio, which is anticipated to contribute $225-250 million in revenue in 2025, accounting for roughly 3% of Marvell's projected sales for the calendar year.
The deal is expected to be finalized within the current year, pending regulatory approvals, which Marvell believes will not face significant hurdles, given the small exposure to China. Infineon has scheduled a conference call on April 8 to provide further details regarding the acquisition. With a market capitalization of $44.2 billion and operating with a moderate debt level, Marvell maintains strong financial flexibility for strategic transactions like this one.
Analysts at Raymond James view the sale as a positive strategic move for Marvell, allowing the company to sharpen its focus on its core Data Center operations, which currently represent 75% of its sales. The valuation of the transaction, at 10.5 times the estimated 2025 enterprise value to sales (EV/S), is seen as particularly favorable for Marvell, especially when compared to the median multiple of 5x at which automotive semiconductor peers such as NXP Semiconductors (NASDAQ:NXPI), ON Semiconductor (NASDAQ:ON), Analog Devices (NASDAQ:ADI), Texas Instruments (NASDAQ:TXN), and Allegro (WA:ALEP) MicroSystems trade.
Moreover, the analysts expect the transaction to have a minimal impact on Marvell's top-line growth and profit margins. They also foresee a slight increase of approximately 3% in earnings per share, assuming Marvell utilizes the proceeds from the sale for share buybacks. The sale to Infineon is seen as a strategic enhancement, reinforcing Marvell's dedication to its data center business and providing financial flexibility for the company's future endeavors. InvestingPro analysis reveals that while Marvell wasn't profitable in the last twelve months, analysts expect positive earnings this year, with 20 analysts recently revising their earnings estimates upward. For deeper insights into Marvell's financial health and growth prospects, including exclusive ProTips and comprehensive analysis, check out the full Pro Research Report, available to InvestingPro subscribers.
In other recent news, Marvell Technology has agreed to sell its Automotive Ethernet business to Infineon Technologies for $2.5 billion. This transaction is anticipated to generate revenue between $225 million and $250 million for fiscal 2026, aligning with Marvell's strategic focus on its core data infrastructure market. The sale is expected to conclude within the 2025 calendar year, pending regulatory approvals. Additionally, Marvell has introduced new advancements in data infrastructure technology, unveiling the industry's first 1.6T PAM4 DSP for Active Electrical Cables and an 800G version to enhance connectivity. These innovations are designed to meet the growing demand for AI, machine learning, and cloud computing services. In another development, Marvell filed a prospectus supplement with the SEC related to its automatic shelf registration for the issuance and sale of securities. This filing includes a legal opinion from Wilson Sonsini Goodrich & Rosati regarding the legality of the securities' issuance. These recent developments highlight Marvell's ongoing efforts to streamline operations and focus on its strengths in data infrastructure technology.
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