Marvell Technology (MRVL) Pre-Earnings Analysis: Is There Potential for Stellar Performance?

Marvell Technology, Inc. (MRVL) is poised to unveil its fiscal 2024 fourth-quarter earnings on March 7, with projections hinting at a modest year-over-year revenue surge to $1.42 billion. Analysts anticipate a slight uptick in EPS from the preceding year's quarter to $0.46, reflecting steady growth and financial resilience.

In a strategic move announced on February 26, 2024, MRVL forged partnerships with industry leaders to pioneer Open RAN solutions specifically tailored for integration into NTT DOCOMO's OREX RAN infrastructure. With Open RAN poised to claim a substantial share of global RAN revenues by 2028, MRVL stands at the forefront of an evolving telecommunications landscape.

Expanding its technological footprint, the company unveiled two cutting-edge optical PAM4 digital signal processors (optical DSPs) on December 6, 2023. These innovations empower cloud operators to meet escalating demands for AI, accelerated computing, and cloud services by optimizing the performance, bandwidth, and efficiency of optical links within data infrastructure.

Currently, MRVL is sampling its groundbreaking Perseus device to select customers. This 400/800 Gbps 5nm device represents a paradigm shift in the industry, seamlessly integrating key electrical components of short-reach pluggable optical modules into a single die.

The result is a reduction in power consumption, space requirements, and overall costs, underscoring MRVL's commitment to driving technological advancement. Shares of MRVL have gained 37.1% over the past six months and 87.7% over the past year, closing the last trading session at $79.35.

Here are the financial aspects of MRVL that could influence its price performance in the near term:

Solid Financials

During the third quarter of fiscal 2024, which ended October 28, 2023, MRVL’s net revenue increased 5.8% year-over-year to $1.42 billion. Its non-GAAP gross profit grew 6.3% from the year-ago value to $859.20 million.

Moreover, the company’s non-GAAP net income and non-GAAP net income per share rose 22% and 24.2% from the prior year’s period to $354.10 million and $0.41, respectively.

Sound Historical Growth

Over the past three years, MRVL’s revenue and EBITDA increased at a CAGR of 23.9% and 22.7%, respectively. Its total assets grew at a 26.1% CAGR during the period. Moreover, the company’s levered free cash flow rose at a marginal CAGR over the same time frame.

Optimistic Analyst Estimates

The consensus revenue estimate of $6.11 billion for the fiscal year ending January 2025 reflects an 11.1% year-over-year increase. Similarly, the company's EPS for the same period is expected to grow 33.4% from the previous year to $2.02. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.

Mixed Profitability

The stock’s trailing-12-month EBITDA margin and trailing-12-month levered FCF margin of 18.17% and 26.84% are 95.5% and 198.4% higher than the industry averages of 9.29% and 8.99%, respectively.

However, the company’s trailing-12-month gross profit margin of 42.10% is 14.3% lower than the industry average of 49.15%. In addition, its trailing-12-month asset turnover ratio of 0.25x is 59.3% lower than the 0.61x industry average.

Stretched Valuation

In terms of forward non-GAAP P/E, MRVL is trading at 51.37x, 103.5% higher than the industry average of 25.24x. Its forward EV/Sales of 12.87x is 339.1% higher than the 2.93x industry average.

Furthermore, the stock’s forward EV/EBITDA and forward Price/Sales of 37.42x and 12.20x are 142.2% and 308.9% higher than the industry averages of 15.45x and 2.98x, respectively.

POWR Ratings Exhibit Mixed Prospects

MRVL’s outlook is reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MRVL has a B grade for Momentum, in sync with the stock trading higher than its 50-day and 200-day moving averages of $66.13 and $58.80, respectively.

However, the stock has a C grade for Stability, consistent with its 24-month beta of 1.80, suggesting a degree of volatility in its stock performance. Furthermore, its Value grade stands at a disappointing D, implying a potentially inflated valuation compared to its industry counterparts.

The stock is ranked #71 out of 90 stocks in the Semiconductor & Wireless Chip industry. Click here to access MRVL’s Growth, Quality, and Sentiment ratings.

Bottom Line

MRVL’s strategic collaborations and innovative product offerings position the company for sustained growth and leadership in the rapidly evolving landscape of semiconductor and data infrastructure technologies. Through these endeavors, MRVL stands poised to capitalize on emerging opportunities and deliver long-term value to its shareholders.

However, despite the company’s promising long-term prospects, its current valuation surpassing industry norms, along with market volatility, advises caution in entering positions in the company. Thus, waiting for a more favorable entry point could potentially yield better returns for investors eyeing MRVL's growth trajectory.

How Does Marvell Technology, Inc. (MRVL) Stack Up Against Its Peers?

While MRVL has an overall grade of C, equating to a Neutral rating, you may check out these A (Strong Buy) and B (Buy) rated stocks within the Semiconductor & Wireless Chip industry: Cirrus Logic, Inc. (CRUS), ChipMOS TECHNOLOGIES INC. (IMOS) and Everspin Technologies, Inc. (MRAM). To explore more Semiconductor & Wireless Chip stocks, click here.

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MRVL shares fell $79.35 (-100.00%) in premarket trading Tuesday. Year-to-date, MRVL has gained 31.71%, versus a 7.78% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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