Marvell falls on tepid forecast; Needham sees it as a buying chance By Investing.com

By Senad Karaahmetovic 

Marvell (NASDAQ:) shares are trading over 10% lower in pre-market trading after the company issued a worse-than-expected quarter for the quarter.

For the fourth quarter, Marvell EPS of $0.46, in line with average analyst estimates, and revenue of $1.42 billion, beating the estimated $1.4B. Net revenue increased by 5.6% year-over-year, despite the 13% drop in Data center revenue.

For this quarter, the company guided to EPS of $0.29 on revenue of $1.3B, signaling a further quarter-over-quarter deceleration. Analysts were looking for EPS of $0.41 on revenue of $1.38B.

“While inventory corrections and resulting changes in product mix are impacting our guidance for fiscal first quarter revenue and gross margin, we expect these headwinds to subside later in fiscal 2024, as inventory levels normalize, and Marvell-specific growth drivers accelerate,” said Matt Murphy, Marvell’s President, and CEO.

Morgan Stanley analysts highlighted a weakness in the data center business.

“The market clearly expected some headwinds, but weaker gross margins, delays in the custom cloud silicon ramps, and the sense that these factors will linger for the next few quarters are all slight negatives to consider,” the analysts said in a client note.

Needham & Company analysts urged clients to buy weakness in MRVL stock as “bad news is mostly out of the way.”

“We estimate Marvell will organically grow revenue by >30% in CY22 and by ~20% in CY23, the fastest growth among its large cap peers, driven by new design wins for its 5nm platform, market share gains and increasing supply from its major wafer foundry, substrate and assembly and test partners. As investors rally behind the fastest growing companies, we believe MRVL’s valuation multiple should expand,” the analysts wrote.