Marvel crushes third-quarter earnings and possesses semi-leader elements
A large part of the investment attractiveness of semiconductor companies such as Marvell Technology (NASDAQ: MRVL) is the fact that they provide chips for industries with significant growth potential. Whether it’s 5G networks, cloud data infrastructure, or the end market for increasingly tech-oriented cars, it’s safe to say that these companies are at the forefront of innovation in the technology sector.
While the tech sector has been pretty weak over the past few trading sessions, the post-earnings reaction for Marvell stock has been a bright spot in a sea of red that shouldn’t be ignored. It’s a company that continues to impress with solid earnings growth, and the stock could be worth adding even at all-time highs.
Here are a few reasons why Marvell Technology stock should be a buy after the company’s impressive Q3 report.
Revenue record in the third quarter
Anytime a company reports record returns, it can certainly pay off to take notice. Such is the case with Marvell Technology, where the fabless semiconductor company recently posted a record $1.2 billion net profit in the third quarter, up 61% year over year. This is impressive for a number of reasons, especially when you consider all the supply chain issues that semiconductor companies are facing right now. Marvell was able to cross the midpoint of the company’s previous guidance thanks to impressive growth in each of the company’s five end markets, which include data center, carrier infrastructure, enterprise and consumer networks, and automotive/industrial.
The company is well positioned to continue its rapid growth thanks to a lot of secular trends working in its favour. For example, as more companies migrate their infrastructure to the cloud, data centers will need to upgrade their bandwidth with Marvell products. 5G networks are another positive for Marvell, as the company’s products can provide the processing power needed for maximum performance. The fact that Marvell management is forecasting revenue growth of 30% year over year in 2023 should tell investors everything they need to know about where this company is headed in the coming years.
Another strong reason to consider adding Marvell stock is the fact that the company continues to make smart acquisitions that enhance its product portfolio. Marvell completed the acquisition of Innovium last quarter, immediately improving the company’s opportunity to capitalize on growth in cloud computing. Specifically, Innovium’s switching architecture is an ideal complement to Marvell’s Ethernet offering and will help the company capitalize on the rapidly growing data center market. Note that by calendar 2026, the data center market for commercial Ethernet switched silicon is expected to grow around $2 billion at a compound annual growth rate of 15%.
While the move to acquire Innovium is certainly a positive one, investors should also note that Marvell also acquired the Inphi semiconductor company in 2021. Inphi provides semi-infrastructure interconnection solutions, and the transaction is expected to generate $125 annual cost synergies. $1 million within 18 months to close the deal. The bottom line here is that Marvell’s is moving away from its low-margin market products and moving into higher-growth industries by making smart acquisitions, which should definitely interest investors.
A wave of analyst promotions
After the company’s third-quarter earnings, Marvell received a flurry of targeted analyst price increases that suggest plenty of upside for investors, even with shares trading at all-time highs. According to the consensus price target of MarketBeat analysts, the average price of Marvell’s stock is $94.50, which means that there could be upwards of 13% of the upside at this time. Karl Ackermann, analyst at Cowen, boosted a near-share price target to $100 after Marvell’s third-quarter results and stated “it’s hard to argue that this was only a quarter-breaker with a triad of better results, better steering, and an expanded design pipeline that anchors the new F23’s evidence.”
While analyst upgrades alone shouldn’t dictate investment decisions, it certainly helps to look at the stocks that command a lot of interest from analysts on the street in such a mixed strip. It’s also worth noting that the stock has been showing relative strength lately, which tells us that there are still plenty of buyers for Marvell Technology even with all the question marks around the market.
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