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Marvell's Dip Seen as Buy Chance Amid AI Growth, Analysts Say

Marvell Technology's forecast misses expectations, but analysts see AI focus as a buy opportunity, with shares dropping 10%.

By Alex P. Chase

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4/12, 06:10 EDT
Broadcom Inc.
Intel Corporation
Marvell Technology, Inc.
NVIDIA Corporation
QUALCOMM Incorporated
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Key Takeaway

  • Marvell Technology's Q4 forecast missed expectations, leading to a 10% stock drop, but analysts see this as a buy opportunity.
  • Analysts raise price targets, citing Marvell's strong AI portfolio and initial shipments to major clients like Google and AWS.
  • With a 54% revenue increase in its data center segment, Marvell is positioned for significant growth in the AI chip market.

Market Response to Marvell Technology's Forecast

Marvell Technology's recent financial outlook has stirred reactions among investors and Wall Street analysts following the company's fourth-quarter earnings report. The semiconductor firm projected a revenue midpoint of $1.15 billion for the current quarter, falling short of the anticipated $1.38 billion by analysts. This guidance, reflecting soft demand in consumer, carrier infrastructure, and enterprise networking, led to a significant 10% drop in Marvell's shares to $76.58, marking a potential largest decline since October 7, 2022. CEO Matt Murphy expressed expectations of overcoming the revenue declines in these sectors post the first quarter, with a recovery anticipated in the latter half of the fiscal year.

Analysts' Optimistic Outlook

Despite the initial negative market reaction, several Wall Street strategists have adopted a more optimistic long-term view on Marvell Technology. Needham researchers, led by N. Quinn Bolton, upgraded their price target on Marvell shares to $95 from $65, maintaining a Buy rating. They encouraged investors to view the current weakness as an opportunity to invest in Marvell's accelerating AI-levered portfolio. Similarly, Piper Sandler analysts Harsh Kumar and Robert Aguanno raised their price target to $100 from $70, reiterating an Overweight rating. KeyBanc Capital Markets analysts also increased their price target to $95, highlighting Marvell's commencement of AI chip shipments to notable customers like Google and Amazon Web Services.

AI and Market Positioning

Marvell Technology's focus on artificial intelligence (AI) and its potential market positioning were key highlights. The company's data center segment, including custom AI chips and networking equipment, saw a 54% revenue increase to $765.3 million. CEO Matt Murphy emphasized AI's growing contribution to the company's revenue, projecting a meaningful increase in the current fiscal year. Furthermore, Bank of America analysts predicted Marvell would benefit significantly from the AI growth, citing its deep intellectual property base and potential to capture over 10% share in the custom AI chip market by 2026/2027.

Street Views

  • N. Quinn Bolton, Needham (Bullish on Marvell Technology):

    "We recommend investors buy on weakness, taking advantage of the weaker non-Data Center businesses to gain exposure to an accelerating AI-levered portfolio."

  • Harsh Kumar and Robert Aguanno, Piper Sandler (Bullish on Marvell Technology):

    "Piper Sandler analysts increased its price target to $100 from $70 and reiterated their Overweight rating."

  • John Vinh and Jim Long, KeyBanc Capital Markets (Bullish on Marvell Technology):

    "The company has said it’s started shipping AI chips to customers—which the analysts believe includes Alphabet ‘s Google and Amazon Web Services. This prompted the team to boost its price target to $95 from $70 and maintain its Overweight rating."

Management Quotes

  • Matt Murphy, CEO of Marvell Technology:

    "While we are forecasting soft demand impacting consumer, carrier infrastructure, and enterprise networking in the near term, we expect revenue declines in these end markets to be behind us after the first quarter, and project a recovery in the second half of the fiscal year."