Marvell Technology, a semiconductor company, witnessed a decline in its shares as investors expressed their disappointment over the absence of a beat-and-raise announcement. Despite this setback, analysts continue to support the stock due to the company's growth in artificial intelligence (AI).
The stock of Marvell (ticker: MRVL) dropped by 4.5% in premarket trading, reaching $54.70, further extending the losses experienced on Thursday. Although Marvell's earnings and guidance aligned closely with expectations, it was impacted by the overall market rotation away from technology stocks.
However, Wall Street analysts affirm their confidence in Marvell's performance. They believe that the company, known for designing data storage and networking chips, is doing a commendable job.
According to Oppenheimer's Rick Schafer, MRVL's growth story is still in its early stages, driven by cloud AI, 5G, and automotive sectors. Schafer maintains an Outperform rating on the stock and sets a target price of $70.
Notably, Marvell received a significant boost earlier this year when it announced an expected AI-related revenue of approximately $400 million for the current fiscal year, with prospects of doubling in the subsequent fiscal year.
Marvell Expects Strong Growth in AI-related Revenue
By Adam Clark
Marvell executives recently announced on an earnings call that they are projecting stronger AI-related revenue growth than previously anticipated. They expect to reach $200 million in the fourth quarter alone, with even further acceleration thereafter. However, there has been a slight delay in their expectations for a data-center storage recovery.
According to John Vinh of KeyBanc, these projections suggest that Marvell could generate over $500 million in AI-related revenue for the current fiscal year and reach $1 billion in the following year. Vinh maintains an Overweight rating and sets the stock's target price at $80.
The recent fall in Marvell's stock and the subsequent volatile stock moves following Nvidia's impressive earnings beat suggest that investors are now setting higher expectations for stocks that have seen growth based on AI hype. Marvell shares had already risen by 55% this year, as of Thursday's close.
However, according to Tejas Dessai, a research analyst at exchange-traded fund provider Global X, Marvell is a long-term investment opportunity tied to the expanding AI spending market beyond Nvidia.
Dessai states, "We believe that low-power, low-price chip providers like Qualcomm, Broadcom, Marvell, and others are well-positioned to benefit from the imminent shift in AI spending."