FBR Capital Raises Price Target on Marvell Technology (MRVL) Following Announced Mobile Platform Restructuring

FBR Capital reiterated a Market Perform rating on Marvell (NASDAQ: MRVL), and raised the price target to $11.00 (from $9.00), following the company's announced plans to restructure its mobile platform division. The company plans to “right size” the division’s expenses and to focus on more profitable investments.

Analyst Christopher Rolland commented, "After the close on Thursday, September 24, Marvell announced a plan to significantly restructure its mobile platform division. While these restructuring actions were long overdue, we were most surprised by the lack of a buyer and divestiture for the group, given the loud drumbeat of recent press and analyst reports detailing a potential deal. We were also surprised by the revelation that gross margins for the division were just ~11% (versus our expectation for 20%– 30%), weighing on overall company gross margins by ~2%–3%. Indeed, while we had hoped for 2016 EPS accretion of ~$0.40 on the closure, it appears to be closer to $0.30–$0.35. While the stock is supported by valuation (12x 2016E EV/ NOPAT including SBC expense), we remain sidelined as we await the results of the accounting investigation and as we believe the company’s core business continues to deteriorate. Additionally, we believe the latest appellate court remand is a net negative for the CMU case, as the ultimate judgment could be significantly larger than the $350 million many investors had expected. We maintain our Market Perform rating but are increasing our price target from $9 to $11 based on 12x our new 2016E EPS (EV/NOPAT including SBC expense)."

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 $9.03 yesterday.

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