Marvell Technology (MRVL stock) (NASDAQ:MRVL) declined by about 7% on Friday after the semiconductor company reported weaker-than-anticipated third-quarter results and forecast. However, analysts emphasized that the business’s long-term trends are still in place, despite going through a difficult “reset.”
Despite the inventory adjustment that negatively affected the quarter and guidance, Cowen analyst Matthew Ramsay observed that the company’s long-term growth drivers, including cloud computing, 5G, custom silicon, and automotive, are still present.
Ramsay stated in a letter to clients that “overall, despite [near-term] weakness and broad inventory decomposition, we remain constructive on underlying secular demand drivers in Marvell’s major Cloud and 5G areas, with Auto beginning to gain pace as well.”
In 2023, new CPU and GPU platforms from Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD), and Nvidia (NASDAQ:NVDA) will launch and ramp up, and Ramsay said Marvell (NASDAQ:MRVL) is “ideally positioned” to profit from these developments.
Ramsay did, however, cut his forecasts for the fiscal year 2024 in light of the inventory adjustment that the company noted in relation to its storage business, as well as cautionary language in relation to its wired infrastructure and consumer businesses.
Tore Svanberg, a Stifel analyst who rates Marvell (NASDAQ:MRVL) as a buy, stated that the company’s third-quarter profitability was “impressive,” pointing to its 64% gross margins and 36.7% operating margins. However, the ongoing correction is likely to dampen investor sentiment, at least in the short term.
“While we have revised downward our [estimated 2024] revenue growth to +1.1% [year-over-year], we note this comes off a strong [fiscal 2023] (on track for +37.4% year-over-year) and remains on track for outperformance vs. peers [Analog Devices (ADI), NXP Semiconductors (NASDAQ:NXPI), and Texas Instruments (NASDAQTXN)], with the broader industry expected to contract in calen.
MRVL Stock, Other Semiconductors Outlook
Following the announcement of the results, the prices of Intel (NASDAQ:INTC), AMD (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), Analog Devices (NASDAQ:ADI), NXP Semiconductors (NASDAQ:NXPI), and Texas Instruments (TXN) all decreased by about 3%. Investors wanted the reset, “albeit more significant than anticipated,” according to Wells Fargo analyst Gary Mobley, who rates Marvel as overweight.
We believe that the inventory draw-down will result in a [revenue] headwind of about 6% to 7% in the first half of fiscal 2024 before things return to normal in the second. Any share price decline would be a purchasing opportunity for us.
Marvell generated $1.54 billion in revenue during the three months that ended on October 29 and earned 57 cents per share, excluding one-time items. The company claimed that the results were hurt by inventory reductions, particularly for its storage customers. Analysts anticipated the corporation to generate $1.56 billion in revenue while earning 59 cents per share.
Regarding the upcoming quarter, Marvell (MRVL) stated that it anticipated revenue to be between $1.33B and $1.43B, less than the $1.62B that analysts had predicted. The poor guidance was also attributed to reduced inventory. Due to its potential for long-term growth, Marvell Technology (MRVL) was singled out by Credit Suisse when it began coverage of the semiconductor sector last month with an overweight rating.
Featured Image: Pexels @ Alessandro Oliverio