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Marvell Earnings: Cloud and AI Strength Offset Telecom Weakness; Maintain $61 Fair Value Estimate
We maintain our $61 fair value estimate for shares of narrow-moat Marvell Technology after a mixed quarter showed terrific strength in cloud and artificial intelligence networks, but weakness elsewhere. Primarily, Marvell’s carrier infrastructure sales, which are exposed to 5G buildouts, are seeing a drop-off in demand as the firm heads into 2024. In our view, the strength of Marvell’s AI sales should more than offset the weakness in carrier customers. We’ve long liked Marvell’s cloud exposure and its rapid growth resulting from AI has led us to meaningfully raise our forecast for the firm’s data center sales in fiscal 2025, which ends in January 2025. We see Marvell as well positioned to service rising network traffic with its command of the optical chip market and believe it can build momentum with its custom processing chips for hyperscale cloud customers in AI networks. Shares dipped on the weak carrier outlook and we see the stock as modestly undervalued.