Marvell Drops 6% After 1Q Outlook; Street Says Buy

Shares of Marvell Technology Group fell 6% in extended market trading on March 3 after the semiconductor company issued financial guidance for 1Q FY22 and quarterly earnings came in line with analysts’ estimates.

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Marvell (MRVL) expects revenues of $800 million in 1Q while non-GAAP diluted earnings per share (EPS) are forecasted to be between $0.23 to $0.31 per share. Consensus estimates were for revenues of $787 million and diluted EPS of $0.27 in 1Q. The 1Q outlook takes into account export restrictions on some Chinese customers by the US government and the uncertainty due to the COVID-19 pandemic.

The company reported net revenues of $798 million in 4Q, up by 11.2% year-on-year that exceeded the midpoint of its guidance provided in the preceding quarter and topped analysts’ estimates of $794.3 million. Non-GAAP diluted EPS came in at $0.29 and in line with analysts’ estimates. (See Marvell Technology stock analysis on TipRanks)

Marvell CEO Matt Murphy said, “Marvell ended fiscal year 2021 on a strong note with fourth quarter revenue exceeding the mid-point of guidance. We delivered outstanding fiscal year 2021 performance, with robust revenue growth of 10%, led by our networking business which grew 22% driven by strong 5G and Cloud product ramps.”

“We are excited about the numerous opportunities ahead in fiscal 2022. We anticipate strong growth in the first quarter of fiscal 2022, projecting revenue to grow approximately 15% year on year at the mid-point of guidance,” Murphy added.

Following the earnings results, Oppenheimer analyst Rick Schafer reiterated a Buy and a price target of $60 on the stock. Schafer said in a note to investors, “We see storage off seasonally in F1Q but likely up at least 10% this year. Auto presents additional upside optionality. Supply constraints should ease going forward but likely linger through CY21.”

“Channel (~25% of sales) inventories remain below target (2.5 weeks) and delinquencies high, though the sole-sourced nature of MRVL’s business likely sees demand pushed forward vs. lost…Given a strong play in 5G, cloud, and auto, we see MRVL positioned for sustained outsized growth,” Schafer added.

The rest of the Street is bullish on the stock with a Strong Buy consensus rating based on 11 Buys and 1 Hold. The average analyst price target of $57.83 implies around 27% upside potential to current levels.