On Wednesday, Susquehanna maintained a Positive stance on shares of Marvell Technology (NASDAQ:MRVL), with an increased price target to $110 from $95. The firm anticipates a steady performance in the upcoming earnings report set for December 3, with potential for higher results driven by Inphi (NASDAQ:IPHI) and custom ASIC segments.
Marvell's Inphi PAM4 DSPs are expected to benefit from strong AI demand, with no signs of a slowdown, as orders continue to strengthen into 2025. The company is also on track to ship its first 1.6T products in the third quarter, sooner than Susquehanna had anticipated.
Despite potential risks from NVIDIA (NASDAQ:NVDA)'s internal DSP development and other market entries, Marvell's custom ASIC and AI products have shown growth, leading to an increased AI revenue forecast well above the previous $1.5 billion estimate for the year.
In the storage sector, despite mixed signals from Seagate and Western Digital (NASDAQ:WDC), cloud demand remains robust. Carrier infrastructure spending is facing headwinds, as evidenced by the results from Nokia (HE:NOKIA) and Samsung (KS:005930), but a year-end content increase from Nokia is expected to aid recovery. Positive trends in enterprise networking, indicated by Cisco (NASDAQ:CSCO), Arista, and Juniper, coupled with decreasing inventories, are also seen as favorable for Marvell.
The consumer segment, with Sony (NYSE:SONY)'s PS5 sales meeting projections and the recent launch of the PS5 Pro, is not anticipated to significantly impact Marvell's outlook. The company has reduced its focus on client SSD/HDD controllers, which should mitigate the effect of softer PC ODM checks. In the auto and industrial markets, outcomes are projected to align with expectations, with inventory adjustments being a key variable.
Susquehanna concludes that while gross margins may face short-term pressure from the ramp-up of custom silicon, the overall momentum for Inphi and ASICs is likely to continue, with possible early recovery signs in carrier infrastructure and enterprise networking.
The outlook underpins the firm's decision to raise Marvell's price target, reflecting a valuation of approximately 57.5 times the estimated calendar year 2025 enterprise value to net operating profit after taxes (EV/NOPAT).
In other recent news, Marvell Technology Group Ltd (NASDAQ:MRVL). has been the subject of several analyst reports. Oppenheimer maintained an Outperform rating on Marvell, raising its price target to $110, driven by growth in custom compute and networking/optics sectors. Deutsche Bank (ETR:DBKGn) also reiterated a Buy rating on Marvell, maintaining its price target at $90, anticipating robust growth in artificial intelligence revenues.
Loop Capital initiated coverage on Marvell, assigning a Hold rating and setting a price target of $95, while expressing caution due to Marvell's current valuation. Moreover, Citi maintained a Buy rating on Marvell shares, predicting the company will surpass consensus estimates for the second half of 2024.
Astera Labs reported a strong fourth-quarter earnings performance, exceeding expectations with revenue projections surpassing analyst forecasts by 19% and an earnings per share outlook 41% higher than anticipated. Evercore ISI responded by raising Astera Labs' price target to $110, maintaining an Outperform rating.
Marvell Technology reported robust Q2 results, with revenues exceeding expectations at $1.27 billion. This prompted other firms like BofA Securities, KeyBanc, and TD Cowen to maintain positive ratings on Marvell, with raised price targets reflecting the company's strong performance.
In terms of leadership, Marvell Technology saw a change in its board of directors with the resignation of Dr. Ford (NYSE:F) Tamer, which the company clarified was not due to any disagreements on operational matters. The company also plans to increase stock repurchases in the third quarter and anticipates sequential growth across all end markets.
InvestingPro Insights
Marvell Technology's recent performance aligns with Susquehanna's positive outlook, as evidenced by InvestingPro data. The company's stock has shown impressive returns, with a 67.21% increase over the past year and a robust 33.72% gain in the last three months. This strong momentum is reflected in the stock trading near its 52-week high, at 97.48% of that peak.
InvestingPro Tips highlight Marvell's financial stability and growth potential. The company has maintained dividend payments for 13 consecutive years, demonstrating a commitment to shareholder returns. Additionally, analysts predict that Marvell will be profitable this year, which is particularly noteworthy given that it wasn't profitable over the last twelve months.
While Marvell's P/E ratio of -82.64 might raise eyebrows, it's important to consider the company's growth prospects in AI and custom ASIC segments, as mentioned in the article. The expected profitability and net income growth this year could justify the current valuation multiples.
For investors seeking a deeper understanding of Marvell's potential, InvestingPro offers 13 additional tips, providing a comprehensive view of the company's financial health and market position.
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