RBC Capital Upgrades Marvell (MRVL) to Outperform, Poised for Multiple Expansion

February 5, 2013 8:10 AM EST
Get Alerts MRVL Hot Sheet
Price: $14.11 +0.07%

Rating Summary:
    17 Buy, 21 Hold, 6 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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RBC Capital upgraded Marvell (NASDAQ: MRVL) from Sector Perform to Outperform with a price target of $13.00 (from $9.00).

The firm said at 12.1x 2014 consensus P/E versus peers at 14.0x, or 8.6x ex-cash, valuation is compelling. Analyst Doug Freedman said sentiment and structural challenges are positioned to alleviate/improve, thus driving multiple expansion. He also said FCF growth is under-appreciated even with the assumption of limited pick-up in Mobile & Wireless.

"Our thesis should be viewed as a call option on executing to its plan in wireless, which is not in our numbers. Raising multiple to 9.5x (vs. prior 8x and 2-year average of 10.3x) which reflects reduced risk to EPS given upcoming trough," Freedman comments.

The firm cut April quarter EPS estimates from $0.15 to $0.13, reflecting HDD TAM reduction and softer end-markets, while raising FY13 EPS from $0.72 to $0.74 as they expect a stronger snap-back to revenues post-AprQ.

For an analyst ratings summary and ratings history on Marvell click here. For more ratings news on Marvell click here.

Shares of Marvell closed at $9.28 yesterday.

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