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Marvell Earnings: We Raise Our Medium-Term AI Forecast and Bring Our Valuation Up to $75

Marvell stock looks fairly valued, but may offer an alternative to other expensive AI plays.

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Marvell Technology Inc

Key Morningstar Metrics for Marvell MRVL

What We Thought of Marvell‘s Earnings

We raise our fair value estimate for narrow-moat Marvell Technology to $75 per share, from $65, as we raise our medium-term revenue forecast to account for significant growth in generative artificial intelligence sales.

We believe Marvell will be a significant beneficiary of investment into generative AI with diverse exposure across custom accelerators, optical chips, and merchant switch chips. Management now sees upside to the targets provided at its AI investor day in April, which we see as positive and aligned with our bullish long-term growth thesis. Marvell’s non-AI end markets remained weak in the first fiscal quarter, but we believe AI strength will more than offset weakness elsewhere through fiscal 2025, and that softer demand is a short-term dynamic. We see Marvell as fairly valued. Investors eager to play into generative AI may see a good opportunity currently, given overvaluations of other AI beneficiaries under our coverage.

Fiscal first-quarter sales fell 12% year over year and 19% sequentially to $1.16 billion, in line with management guidance. Data center sales rose 87% year over year and 7% sequentially, led by rising growth from generative AI applications. Every other end market for Marvell declined in the double digits year over year, with enterprise, telecom, and consumer customers digesting built-up inventories and slowing new orders. We expect steep declines for Marvell’s non-data center end markets through fiscal 2025, but for growth to resume thereafter. A higher mix of data center sales weighed on gross margin, but we see a non-GAAP level of 62% as healthy for the firm and a decent floor against weak end demand outside of the data center.

Fiscal second-quarter guidance was constructive, implying 8% sequential revenue growth at the midpoint. We model Marvell to approach the high ends of its guidance ranges next quarter as we model robust sequential data center and AI growth. We model sequential growth and margin expansion through fiscal 2025.

Marvell Technology Stock Price vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

William Kerwin, CFA

Equity Analyst
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William Kerwin, CFA, is an equity analyst on the technology team for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar Inc. He covers the IT supply chain, hardware, and semiconductor stocks.

Before joining the firm full-time in 2019, Kerwin was an intern on Morningstar's basic materials team.

Kerwin holds a Bachelor of Science in economics with a math emphasis and French from the University of Wisconsin-Madison.

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