On Wednesday, Marvell Technology Group Ltd . (NASDAQ:MRVL) saw its stock price target increased by Morgan Stanley (NYSE:MS) from $82.00 to $102.00, while the firm maintained an Equalweight rating on the stock.
The revision reflects Morgan Stanley's view on Marvell's sustained growth drivers and its potential to outperform in the coming years with the aid of Artificial Intelligence (AI). According to InvestingPro data, the stock has delivered an impressive 85% return over the past year and is currently trading near its 52-week high of $98.72.
The analyst from Morgan Stanley acknowledged the compelling story behind Marvell, citing its unique position in infrastructure markets and growth drivers that have included 5G, cloud computing, custom microprocessors, and most recently, AI. These factors are believed to enable the company to outpace typical market cycles.
InvestingPro analysis shows the stock is currently trading at elevated multiples, with an EV/EBITDA ratio of 86.6x, confirming Morgan Stanley's valuation concerns. Despite this positive outlook, the analyst pointed out concerns about the stock's high forward price-to-earnings (P/E) multiple, particularly when factoring in stock compensation.
Historically, Marvell's earnings, including stock compensation, have not exceeded $1.36 over the past eight years, averaging $0.71 with significant fluctuations. On a non-GAAP basis, which excludes certain items like stock compensation, earnings have peaked at $2.12 and averaged $1.30. The analyst projects that, with the integration of AI, Marvell's earnings could surpass these levels by Calendar Year 2026.
The decision to raise the price target is based on rolling forward the valuation to Calendar Year 2026 and maintaining a multiple of 47 times the modified working estimate (MW EPS) of $2.18. Although the analyst sees potential for near-term gains, the high valuation and potential market share risks in 2026 are reasons for maintaining the Equalweight rating.
InvestingPro analysis indicates the stock is currently overvalued compared to its Fair Value, with analyst price targets ranging from $74.20 to $135.00. Subscribers can access 14 additional ProTips and comprehensive valuation metrics through the Pro Research Report.
Marvell's stock performance is compared to peers such as NVIDIA Corporation (NASDAQ:NVDA) and Broadcom Inc. (NASDAQ:AVGO), with Morgan Stanley previously assigning a 47 times MW EPS for Marvell's Calendar Year 2025, compared to 42 times for NVIDIA and 34 times for Broadcom. The multiples on a non-GAAP basis are much closer, but when choices are to be made, the analyst favors NVIDIA and Broadcom over Marvell.
In other recent news, Marvell Technology Group Ltd. has been the subject of numerous analyst upgrades. Benchmark raised its price target on Marvell to $135, highlighting the company's strong performance in the AI and Data Center sectors. BofA Securities also increased its target to $125, expecting Marvell's annual earnings per share (EPS) growth to be around 40-50% in the coming years.
Wolfe Research and Stifel followed suit, setting their targets at $130 and $125 respectively, citing the company's strong revenue growth from the AI data center sector. Rosenblatt set the highest target at $140, attributing it to Marvell's robust demand in data center and AI.
These recent developments reflect the positive sentiment analysts have towards Marvell's financial performance and future prospects. Marvell's recent financial results surpassed market expectations, especially with the significant presence in the AI and Data Center sectors, which currently represent 73% of its total revenue. The company has also entered into partnerships with Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL) to co-develop custom accelerators.
Analysts from various firms anticipate that Marvell will significantly surpass its fiscal year 2025 and 2026 revenue goals for the AI sector. These targets were set at $1.5 billion and $2.5 billion, respectively. The company's advancements and collaborations with tech giants like Amazon and Google underscore its competitive edge and the increasing demand for its specialized semiconductor solutions.
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