Editor’s Note: An earlier version of this story incorrectly implied that Marvell wasn’t in Bullpen yet. We apologize for any confusion.
After hinting in daily summary that we will be revisiting the semiconductor stock, we would like to explain in more detail why we are adding shares of Marvell Technology (MRVL) arrive Action Alert PLUS Byre.
As the current earnings season kicked in, we got a reminder from NXP Semiconductor (NXPI), Intel (INTC), and Samsung (SSNLF), about the challenging months ahead for consumer electronics, especially PCs and smartphones. That has and will probably continue to affect the outlook for some chip companies, so to speak, high profile ones like AMD (AMD), Intel and Qualcomm (QCOM), all of which derive significant revenue from PCs and smartphones.
That brings us to Marvell, more properly classified as an infrastructure semiconductor company, with end-market exposure of about 88% of infrastructure and 12% of consumers. More specifically, data centers account for about 40% of revenue, enterprise networks nearly 25%, telecommunications networks 18%, consumers 12%, and automotive 5%. Those end markets are driven by increasingly chip-intensive automobiles, as well as the continued growth of digital entertainment and communications driving demand for mobile network infrastructure. By 2022, video will account for nearly 70% of all mobile network traffic, which shows growth in video consumption across social media, streaming, video conferencing, and video chat. It also points to the strain on digital infrastructure.
We will be looking to choose our position with MRLV stock. Current expectations call for the company’s earnings per share to drop by about 20% in the first half of fiscal 2024, which is the quarters ending April and July 2023. However, as they are. I noted recently, when we looked at recent price action with Lam Research (LRCX) and even Microsoft (MSFT), the market shook off discount guidance and layoffs. Part of this may be that the market’s forward view has begun to think about the second half of the year and is about to exit what is predicted to be a short and shallow recession.
MRVL stock bottomed out in early 2023, so we’ll be more cautious on the stock from here on out. In our next discussion of stocks, we’ll think more about valuations and potential long-term price targets.
