Marvell (MRVL) Gains After Delivering a Beat-and-Raise Quarter, Analyst Upgrades to 'Buy'
Shares of Marvell (NASDAQ: MRVL) are trading about 5.5% higher in pre-open trading Tuesday after the company reported better-than-expected earnings for its Q1.
The California-based company said it made a profit of $0.29 per share on sales of $832.3 million for the quarter ending May 01. This compares to analysts’ expectations of $0.27 per share on sales of $806.7 million.
"We began fiscal 2022 on a strong note, with stand-alone Marvell revenue growing 17% year-over-year for the first quarter. The acquisition of Inphi increases and accelerates our growth opportunity in the data center, Marvell's largest end market by revenue," said Matt Murphy, Marvell's President and CEO.
For the current quarter, the company guided to an adjusted $0.31 per share on sales of $1.06 billion to again top the consensus of $0.30 on sales of $841 million in the fiscal second quarter.
"Marvell's outlook for strong revenue growth in the second quarter highlights robust demand across all our key end markets. I have never felt stronger about our prospects and believe that we are at the beginning of a multi-year growth cycle."
A beat-and-raise quarter from MRVL resulted in a stock upgrade to “Buy” from “Hold” at Summit Insights, whose analyst Kinngai Chan believes “industry dynamics are turning favorable driven by cloud, enterprise, and carrier spending strength.”
“Our industry checks indicate a strong return in cloud spending, N.America 5G carrier ramp, and enterprise networking recovery to benefit MRVL in 2H21 and possibly through 2022. Additionally, we believe MRVL's new design wins will carry a higher ASP as well as a higher gross margin compared to its existing designs. Furthermore, we expect the industry supply constraint to improve significantly through 2H21, which gives MRVL more potential for further upside,” the analyst said in a memo.
Chan joined Mizuho’s Quinn Bolton, who already rates MRVL as “Buy.” Bolton also raised the price target to $55.00 per share from $50.00 per share.
“Driven by its solid history of execution and its expanding product portfolio targeting high margin, high growth data center and infrastructure markets, we remain positive on Marvell. Within its Networking business, we expect growth to be driven by the ramp of its new design wins in 5G base stations, adoption of ARM-based CPUs in the data center, and the ramp of new multi-gig Ethernet switch and PHY designs in the enterprise market,” Bolton wrote in a note.
“We believe these drivers will continue through CY21 and CY22. We also believe Marvell's Storage business will grow as the market recovers and its DIY SSD controller designs with a tier-one system level OEM customer and a cloud customer continue to ramp and drive growth. Marvell expects to increase GMs at Avera and Aquantia to levels near the corporate average over time as the company expands its portfolio of integrated, higher value added products with a broader range of customization.”
Susquehanna analyst Christopher Rolland also raised the price target to $64.00 per share from $62.00 per share as cloud outlook accelerates.
“Supply constraints appear to have capped Marvell’s near-term sales (once again), but the long-term story is very much intact and perhaps accelerating with new hyperscale ASIC opportunities layering in. We remain Positive-rated, driven by 5G, hyperscale, and custom ASIC opportunities,” the analyst commented in a note.