Cowen Boosts PT on Marvell (MRVL) to $18; New Management Produces Results
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Cowen and Company boosts its price target on Outperform-rated Marvell Technology Group (Nasdaq: MRVL) from $16 to $18 following Q3 results reported Thursday night.
Analyst Tim Arcuri and his team commented today:
With a trifecta of better results, better guidance, and line of sight to 60% GM within 4Qs, this was a watershed Q. New management is applying professional techniques to strip out costs, reposition product lines, exit unprofitable revenue, and return some cash while still maintaining optionality for future M&A. Just about the only thing people might not like is the size of the share repo, which is admittedly somewhat pedestrian, but MRVL is trying to appease shareholders while also maintaining liquidity for M&A once existing businesses are right-sized and fortified. The improvement in GM is coming faster than we expected with mix helping in the near-term, but hard-core supply chain initiatives still really on the come.
We have long argued for ~$1.40 EPS power here and it is now very clear this might even be conservative as we can get ~$0.30/Q at ~$600MM/Q revs, 60% GM, opex that encompasses the cuts, and some more share buyback and this all includes SBC. Stripping out SBC, you are at ~$1.40 and this is before the "hard stuff" of picking the right M&A targets to grow the business (probably in networking to build scale). From here, MRVL should start to get a forward multiple that is more in-line w/semis, thus arguing this should at least be an $18 stock with upside to this number over time.
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