Q4 Preview: Recent Recovery in Storage May Be Priced Into Marvell (MRVL) Shares

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MRVL Hot Sheet

Rating Summary:
14 Buy, 8 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0

Ahead of fourth-quarter results, shares of Marvell Technology Group (Nasdaq: MRVL) have pulled back by about 4 percent since Thursday of last week. Investors have been buying the stock since Marvell reduced its quarterly sales guidance on January 27th. The stock is up a modest 2 percent since late last month.

Analysts expect Marvell to post fourth-quarter earnings of 18 cents per share on sales of $740.30 million. Compared to the same quarter in 2011, such results would mark a 45 percent decline in profit and a nearly 18 percent move lower in revenue.

According to data from Bloomberg, 26 analyst firms have Buy ratings on Marvell, nine suggest to hold the stock, and two recommending selling shares ahead of the release. Analyst price targets' range from $13 to $22.

Shares of Marvell currently trade at 13.7x next year's earnings, versus a multiple of 13.4x at TI and 12.2x for Broadcom.

Analyst Comments:

DA Davidson - Maintains Buy, $19 target on Marvell. Looking for EPS of 18 cents on sales of $743.7 million. Expecting near-term softness in the Wireless segment amid "normal seasonality and greater than expected weakness in the Chinese Wireless market..." Modeling for "strong sub growth at China Mobile as subsidies increase, which should lead to better wireless revenue in the July/October quarters." Sees the company's Storage segment resuming growth in the first quarter.
JPMorgan - Maintains Overweight, $18 target. Sees EPS of 18 cents. Believes this quarter will be the bottom for revenue, with growth returning next quarter. "We estimate the HDD business will increase ~2%, which is consistent with WDC's production outlook, and drive overal growth in the Apr-Q. Modeling for 8 percent decline in Mobiles/Wireless sales and 5 percent decline in Networking.
Benchmark - Downgraded the stock from Buy to Hold on February 13th, suggesting the bet on the "HDD & chip industry recovery is already placed." The firm cites similar points as the prior two analysts, however, believes these will be negatives (Marvell shares are up 18 percent throughout 2012). "It is obvious investors have sniffed out this HDD recovery trade." Sees EPS of 17 cents.
Deutsche Bank - Maintains Buy, $18 target. Looking for earnings of just 10 cents per share. While the firm expects an inline quarter, Deutsche believes the Street is "overly optimistic" for the first quarter. Focusing on 1. HDD unit growth, 2. market share gains, 3. TD handset growth, 4. ASP's and 5. growth outside the core business.

Marvell will report its fourth-quarter earnings on Thursday, February 23rd after the closing bell rings. The conference call is scheduled for 4:45pm ET. Interested parties may join the conference call by dialing 1-866-510-0711 or 1-617-597-5379, pass-code 29835186.

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