Marvell Crushes Q3 Earnings and Has the Makings of a Semi Leader
A big part of the allure of investing in semiconductor companies such as Marvell Technology (NASDAQ: MRVL) is the fact that they supply chips to industries with tons of growth potential. Whether it's 5G networks, cloud data infrastructure, or the increasingly tech-oriented automotive end market, it’s safe to say that these companies are at the forefront of innovation in the tech sector.
While the tech sector has been very weak over the last few trading sessions, the post-earnings reaction for Marvell stock was a bright spot in a sea of red that should not be overlooked. It’s a company that continues to impress with strong earnings growth, and the stock could be worth adding even at all-time highs.
Here are a few reasons why Marvell Technology stock is a buy after the company’s marvelous Q3 report.
Record Revenue in Q3
Anytime a company reports record revenue, it can certainly pay off to take notice. That’s the case with Marvell Technology, as the fabless semiconductor company recently delivered record net revenue of $1.2 billion in Q3, up 61% year-over-year. This is impressive for a number of reasons, particularly when you consider all of the supply chain issues that semiconductor companies are facing at the moment. Marvell was able to exceed the midpoint of the company’s previous guidance thanks to impressive growth in each of the company’s five end markets, which include data center, carrier infrastructure, enterprise networking, consumer, and automotive/industrial.
The company is well-positioned to continue its rapid growth thanks to plenty of secular trends working in its favor. For example, as more businesses migrate their infrastructure to the cloud, data centers will need to upgrade their bandwidth using Marvell’s products. 5G networks are another positive for Marvell, as the company’s products can deliver the processing power needed to achieve maximum performance. The fact that Marvell’s management expects revenue to grow at a 30% year-over-year rate in 2023 should tell investors all they need to know about where this company is going in the coming years.
Another strong reason to consider adding shares of Marvell is the fact that the company continues to make savvy acquisitions that strengthen its product portfolio. Marvell completed the acquisition of Innovium last quarter, which instantly improved the company’s opportunity to take advantage of the growth in cloud computing. Specifically, Innovium’s switching architecture is the perfect complement to Marvell’s Ethernet offerings and will help the company take advantage of the fast-growing data center market. Note that by calendar 2026, the data center market for merchant Ethernet switch silicon is expected to grow by approximately $2 billion at a 15% CAGR.
While the move to acquire Innovium is definitely a positive, investors should also note that Marvell acquired the semiconductor company Inphi as well in 2021. Inphi provides infrastructure interconnect semi solutions, and the deal is expected to generate annual cost synergies of $125 million within 18 months of the deal closing. The bottom line here is that Marvell’s is moving away from its lower-margin legacy market products and into high growth industries by making smart acquisitions, which should definitely excite investors.
A Flurry of Analyst Upgrades
Following the company’s Q3 earnings, Marvell received a flurry of analyst price target increases that imply plenty of upside for investors, even with the stock trading at new all-time highs. According to MarketBeat’s consensus analyst price target consensus, Marvell stock has an average price target of $94.50, which means there could be over 13% of upside at this time. Cowen analyst Karl Ackerman boosted his price target for the semi stock to $100 after Marvell’s Q3 results and mentioned "It's hard to argue this was anything but a watershed quarter with a triad of better results, better guidance, and an expanding design pipeline that anchors a new F23 guide,”
While analyst upgrades alone shouldn’t dictate investing decisions, it certainly helps to look at stocks that are receiving a lot of attention from analysts on the street in such a mixed tape. It’s also worth mentioning that the stock has been showing relative strength lately, which tells us that there are still plenty of buyers for Marvell Technology even with all of the question marks about the market.
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