Marvell Technology Inc. had Tough procedure to follow this week, as it announced the day after Nvidia Corp.’s surprise. The collective brain on Wall Street has billions of dollars more in data center sales than analysts expected.
It didn’t deliver the same results as Nvidia, which showed up in Friday’s stock sell-off.
Shares of Marvell fell nearly 9% on Friday to an intraday low of $52.25, after the chipmaker, with a data center presence, reported a small earnings win and provided a matching forecast.
The company’s data center sales fell 29% to $459.8 million in the most recent quarter, although it topped FactSet’s consensus of $439.9 million. In contrast, NVIDIA reported data center sales the day before that were more than $2 billion above Wall Street expectations.
Matthew Ramsey, an analyst at TD Cowen, said the Marvell report was “about what we expected as AI-led upside was offset by weakness in other sectors.” However, the analyst said that Marvell needs stronger numbers to convince investors who are still impressed by Nvidia’s epic results, as it’s possible that the “lack of physical numbers in the last couple of quarters” has left investors wanting.
“It’s not Nvidia, but nobody is,” Ramsey said in a note on Friday. “Although the results were strong, we note that many investors were likely disappointed by the lack of significant upside, given both the tone and the actual connection to Nvidia systems following that company’s results and evidence,” Ramsey said.
He gave the stock an outperformance rating and a price target of $65.
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Jordan Klein, a Mizuho bureau analyst, said that although Marvel’s forecasts were “disappointing,” sales of artificial intelligence were greater than expected.
“No one really expected Marvel to direct or voice anywhere close to Nvidia,” Klein said, adding that “the upside, the main positive, has been much better AI (revenue)”. Marvel said it now sees the potential to reach $800 million in artificial intelligence sales by the end of this year.
“Marvell’s Inphi was the star of the show,” said Christopher Rowland, financial analyst at Susquehanna, referring to products such as the PAM4 digital signal processors used in cloud data centers, which the company acquired through its 2020 acquisition of Inphi.
Rowland said Marvell has increased its AI-related revenue forecast from $400 million to “something higher,” perhaps $550 million this year, as the company expects to come out with about $200 million in the quarter. This indicates that next year’s estimate of $800 million was too low.
He has set a positive rating and a target price of $70 for the shares.
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Of the 30 analysts who cover Marvell, 27 have Buy ratings on the stock, and three have Hold ratings. Of those, seven raised their target prices, while one lowered their target price, resulting in an average price target of $70.94, up from a previous $70.27, according to FactSet data.
Even with Friday’s sell-off, Marvell shares are still up 44% year-to-date, compared to a 37% gain in the SOX Semiconductor PHLX Index.,
A 14% rise in the S&P 500 SPX and a 29% increase in the heavy Nasdaq Composite COMP over the same period.