Is Marvell Technologies a buy?

It’s time to update a lesser-known semiconductor name. Here is the breakdown on $MRVL, otherwise known as Marvell Technologies.

Current Price: $40.80

52/Wk High: $45.04

52/Wk Low: $16.45

Market Cap: $27.8 billion

Dividend: $0.06 / 0.59% Yield

Read below for the breakdown!

Marvell is an excellent semiconductor and has shifted the majority of the business into the focus of 5G. The company's goal is to build out the 5G network that will support all of the new devices and systems that will soon use 5G.

In order to grow the business and expand its reach, Marvell Technologies has made several acquisitions in the last several years. 

First Marvell made a deal to buy out Cavium for $6 billion in 2018. Cavium is a chipmaker as well, and by acquiring the competitor Marvell expanded its wireless connectivity business far quicker than the competition.

Secondly, Marvell acquired Aquantia in 2019. This acquisition strengthened Marvell’s ethernet segments in the multi-gig world of 5G and more. 

Thirdly, the Aquantia acquisition further strengthened Marvell’s power to benefit from future high-speed networking, which will be used in cars for autonomous drive solutions.

Finally, Marvell Technologies made a third acquisition in late 2019 of a company named Avera, another semiconductor and competitor. 

Avera, the Application Specific Integrated Circuit (ASIC) business of GLOBALFOUNDRIES only adds to Marvell’s strong portfolio, strengthening their foothold within 5G infrastructure, Data Centers, Enterprise, and Automotive solutions.

The positivity on Marvell Technologies doesn’t stop there though. Marvell is a leader in Data Processing Units or DPUs, which are said to be a key part of future computing and AI technologies.

Given the sheer growth of Marvell in recent years and solid footing for technology's future, Marvell continues to beat earnings estimates.

Taking a look at the last reported quarter, Q2, Marvell Technologies reported a strong beat. Marvell reported a Q2 EPS of $0.210 versus the analyst’s consensus estimate of $0.201.

Secondly, Marvell delivered solid Q2 revenues of $727 million, up 10.77% year-over-year all the while improving GAAP gross margins, which came in at 49.4%.

It is also important to note that Q2 non-GAAP net income was also strong, coming in at $140 million.

When it comes to guidance Marvell Technologies management was bullish for Q3 as of the Q2 report. Management expects Q3 revenues of $750 million and an improved GAAP gross margin of 51.4%.

Digging into the balance sheet, Marvell is financially well positioned but could be better;

Total Debt: $1.441 billion

Total Liabilities: $2.509 billion

Total Assets: $10.926 billion

Cash & Short Term Inv: $832 million

While the balance sheet does need some improvement on the cash side of things, Marvell Technologies is financially sound. 

When it comes to valuation, Marvell is not extremely overpriced compared to its competitors;

Price to Earnings: 20.53x

Price to Sales: 9.78x

Price to Book: 3.25

Based on the valuation metrics, Marvell Technologies is quite undervalued compared to competitors such as Nvidia which currently trades at a price to sales ratio exceeding 90 times.

Taking in the numbers, the analysts are quite bullish on Marvell. Currently, the mean price target is $47.05/share, representing a 13.46% gain.

Secondly, the high price target is $60.00/share, representing a whopping 44.68% gain, all the while the low price target is $31.00/share, representing a -25.25% loss. 

The big money is just as bullish as the analysts. Currently, 88.49% of Marvell Technologies is owned by institutions. Top holders include T Rowe Price Associates, Fidelity Management & Research, and The Vanguard Group.

Finally, when it comes to the technicals Marvell Technologies could be flashing opportunity. According to the six-month, the MACD is currently running sideways within a range of 0.8916 down to 0.5395.

Not only that but the six-month RSI is roughly neutral at 52.87 along with a lower CCI of -33.26. It is also important to note that Marvell currently trades roughly 4 points off its highs.

In short, I like Marvell both in the short and long term. Given its solid resistance to market volatility, expected growth, and fair valuation I believe Marvell can continue higher.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply opinion based on independent research.