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The Melt-Up In Marvell Is On; But Don't Chase It Higher

Marvell logo, sign at Marvell Technology headquarters in Silicon Valley - Santa Clara, California, USA - 2021

Marvell Technology (NASDAQ: MRVL) started moving higher before the Q1 earnings were released because of results released by NVIDIA (NASDAQ: NVDA). NVIDIA’s results were down compared to last year but well above the consensus estimate and came with solid guidance. The guidance is mind-blowing and driven by data center/AI demand. Marvell is also exposed to AI and seeing high demand, evident in its CQ1 results.

The difference is that Marvell’s stock is lagging well-behind NVIDIA’s but is on track to catch it by the looks of the post-release action. The market is up a solid 20% following the release and still has a long way to go. 

Marvell: Mixed Results But In All The Right Ways 

Marvell had a mixed quarter, but it was mixed in all the ways investors love to see. The revenue of $1.32 billion is down 9.0% compared to last year but beat the consensus estimate on strength in the 1 area that counts today: AI. The company is still in the AI ramp's early phases and expects revenue to accelerate over the next few quarters. Given the surge in NVIDIA’s AI business, the company will likely see a similar surge, which is getting priced into the market. 

"AI has emerged as a key growth driver for Marvell, which we are enabling with our leading network connectivity products and emerging cloud optimized silicon platform. While we are still in the early stages of our AI ramp, we are forecasting our AI revenue in fiscal 2024 to at least double from the prior year and continue to grow rapidly in the coming years,” said Matt Murphy, Marvell's President and CEO.

The earnings were also better than expected at $0.31 adjusted, which exceeded the topline strength. The guidance may be cautious, forecasting sequential growth in Q2 and accelerating revenue growth, margin expansion, and earnings growth in the 2nd half. 

The Analysts Will Be The Next Catalysts For Marvell Stock 

The analysts have yet to update their outlook, but at least 3 have commented. Barclays analyst Blayne Curtis maintained an Overweight rating citing several factors in the company’s favor. In his view, Marvell is a safer way to play AI. The company’s tempered view of core markets and view of AI have stoked the fire regarding its growth. He and analysts from Citigroup and Wells Fargo expect the company to outpace peers over the next few quarters to several years.

The analysts’ consensus estimate is just above $61, which assumes the stock is fairly valued at the new high. This may cap gains until there are revisions which can be expected to be upward. In this case, the analyst will help drive the stock to new highs and possibly up to new all-time highs, as seen with NVIDIA. In that scenario, this stock could gain triple digits. 

The Technical Outlook: Marvell Is Melting Up 

Marvell is melting up on the good news of AI. AI will drive its business for several years and sustain it for a long time. The next few quarters would see accelerating growth and outperformance to help sustain a rally. The question is if this will be a slower, sustained rally or if the next quarter will bring blow-out results akin to NVIDIA and have that get priced into the market. Either way, investors stand to make a fair return with this stock. 

stock charts Nvidia and Marvell

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