The Analysts Are Pushing Marvell Technologies Higher
Marvell Technologies (NASDAQ: MRVL) is well-positioned within a sector experiencing significant secular tailwinds. Marvell Technologies makes a wide range of analog, mixed-signal, stand-alone, and embedded integrated circuits used by businesses and industries worldwide. The company is experiencing record-level demand for its products and that is seen in the earnings results, results that continue to outpace the analyst’s consensus estimates. The latest earnings results were so strong, in fact, they spurred 25 of the 28 analysts covering the stock to bullish commentary.
Analysts from Bank Of America, UBS, Rosenblatt, and Citigroup agree that Marvell Technology is a top pick for next year. Citigroup, surprisingly, also views Marvell Technology as a high-probability target for aggressive dividend growth as well. Regardless, the Pricetargets.com consensus is a firm Buy with a price target that has made notable gains over the past year. The consensus of $97.50 assumes a mere 7.2% of upside for the stock but it is up more than double from last year, 45% over the past 90 days, and 27% in the last 30 days with no top in sight. The high price target of $120 was set in the last month as well, implying about 30% of upside for the stock, and we think this target will soon be exceeded.
Marvell Technologies Exceeds Guidance, Guides Higher
Marvell Technologies was expecting and expected to have a strong quarter and it did, exceeding not only the consensus estimates but its own guidance as well. The company reported $1.21 billion in net revenue driven by strength in all five of its end markets for a gain of 13% sequentially and 61.3% over last year. Last year the company’s revenue grew 13% in the 3rd quarter so this is no easy comparison. In regards to the analysts, the company’s revenue beat the consensus by $0.06 billion or about 520 basis points. The biggest growth was in the Datacenter segment, no surprise there, which grew by 15% sequentially and 109% YOY to account for more than 40% of the net.
Moving down the report, the company experienced a better than expected margin with a gross margin of 48.5% and an adjusted margin of 65.1% or up 210 basis points from last year. On the bottom line, both the GAAP and adjusted earnings beat the consensus by a nickel with adjusted earnings rising 72% from $0.25 to $0.43.
Looking forward, the company is expecting the strength to continue and we see upside risk in the numbers. The company guided the market to $1.32 billion in net revenue for the fourth quarter compared to the then consensus of $1.21 and for similar strength in the earnings. In their view, all five segments should perform well with a notable pickup in demand for 5G supplies. In our view, systemic demand for chips is still on the rise providing ample momentum for Marvell Technologies to capitalize on.
The Technical Outlook: Marvell Confirms Uptrend
Marvell Technologies popped in the wake of its Q3 report and improved guidance and has since confirmed support at a new, higher level. This is indicative of a strongly trending market and one that we see advancing to another new all-time high very soon. The next target for resistance is at the current all-time high, near $92.50, and it should be reached within days. Assuming the stock is able to make a new all-time high, the next technical target would be in the range of $120 and the current Pricetargets.com high price target.
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