The MRVL stock predictions article was written by Chloe Peng, Analyst at I Know First. Master of Science of Finance candidate at Brandeis University.

Summary

• Marvell recovered from COVID-19 impact quickly and doubled its stock price since mid-March 2020, with earnings beating estimations.
• Marvell ‘s partnership with Samsung and Nokia grants it with great opportunities in 5G market and strong growth potentials.
• According to the DCF model, the fair value of MRVL stock should be 61% higher than its current price. Thus, I have a bullish outlook for MRVL in 2020.

The US stock market has disapproved many analysts’ negative estimations, with the S&P 500 rallying 40% from its bottom on March 23. The sector index PHLX semiconductor ETF fared even better, returning 44% since March 23. The index is now up 5% for 2020, while the S&P 500 is down 2.5%. In fact, the index has been outperforming S&P 500 for the past 5 years. See chart above.

The out-performance may continue. According to Brad Neuman of Alger Investments, there’s a 50-year technological revolution in “connected intelligence,” with an incredible expansion of data processing. That means gravy for semiconductor designers, manufacturers and equipment makers.

While these indexes show a promising recovery trend and a satisfying return, none of them can beat MRVL. You see from the chart below that Marvell Technology recovered quickly from COVID-19 impact and its stock price soared since mid-March 2020, doubled from 17.25 to 35.89.

Company Overview

Marvell Technology Group, together with its consolidated subsidiaries, is a semiconductor provider of application-specific products. The company is focused on the development of System-on-a-Chip (SoC) devices, utilizing its technology portfolio of intellectual property in the areas of analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. The company also develops integrated hardware platforms along with software that incorporates digital computing technologies. It mainly provides devices for networking and storage.

For storage business, Marvell Technology is a leader in fiber channel products and data storage controller solutions spanning cloud, enterprise, edge and personal computing markets.

For networking business, Marvell develops Ethernet solutions, embedded processors and WiFi connectivity solutions. These products address multiple end markets in cloud, consumer, enterprise, and service provider networks.

MRVL Will Outperform Thanks to 5G Ramp

JP Morgan analyst stated in its report that Marvell is very likely to benefit from 5G ramp and he is confident with the company’s future potential.

As a relatively smaller player in the semiconductor chip industry, Marvell might not drive too much attention when investors think of the sector. But it’s actually very active in developing 5G businesses. It partnered with Samsung in early 2019 on 5G development and worked to acquire competitors Avera and Aquantia – Avera in a deal worth $650 million and Aquantia for $450 million. Both moves were made in cash, a measure of Marvell’s fundamental strength.

Samsung and Marvell are collaborating on the development and launch of multiple generations of radio and control plane processors for both LTE and 5G NR, enabling carriers to deploy multi-radio access technology in order to meet the ever-increasing data usage of today’s users and emerging applications.

People see great revenue growth in the 5G market, see the chart below.

As if it wasn’t enough, late in 2019, Nokia implied its bad relationship with its chip supplier and worked together with Marvell for the first time on infrastructure products.

Now, Marvell has won considerable content with Samsung and a fair bit with Nokia, so how those two players fare in the 5G vendor race will be key to Marvell’s performance. Samsung is truly a leader in 5G market. See the following chart of global 5G smartphone shipments in 2019 and 1Q 2020.

Although not planning to sell smartphones, Nokia is the only vendor with a globally available end-to-end product portfolio that covers all 5G network elements, including radio, core, cloud and transport as well as management, automation and security. These engagements with big telecom companies give Marvell a good status in the telecom market, a major opportunity and give a beautiful ‘growth story’.

Earning Ability of MRVL

According to the company’s Q1 report, Marvell team drove strong first quarter financial results with disciplined operating expense management, healthy operating cash flow, and revenue above the mid-point of guidance. Also, it has seen stronger demand for networking products from the data center and 5G infrastructure end markets and expects the businesses to grow further in Q2. For its storage businesses, the company experienced interruptions on supply chain by COVID-19, but the management are confident for a bounce back in Q2.

Marvell Technology keeps surpassing people’s expectations with strong earnings. The chart below presents you that MRVL has been outperforming forecasts most of the times since 2019 Q3, which is a very positive sign for investors. The circle stands for EPS estimation and the green dot stands for actual result.

Moreover, the trend shown in the following graph verifies my projection that Marvell has good earning potentials in the future. The upward curvature of the plotted points in the graph on the right indicates that while Marvell Technology Group Ltd.’s earnings have risen from $0.04 to an estimated $0.31 over the past 5 quarters, they have shown acceleration in quarterly growth rates when adjusted for the volatility of earnings. This indicates that Marvell will improve future earnings.

Wall street analysts generate positive forecasts for the company’s revenue and earnings. They project a 52% growth in earnings next year, taking account into both the company’s growth in business and the recovery from COVID-19.

Valuation

We are still under the effect of Coronavirus spread and it is difficult to estimate the fair share price using the discounted cash flow (DCF) model because it would be more difficult to make reasonable assumptions. However, based on my analysis of the market and the company, the fair price of Marvell Technology is around $57.75, which is 61% higher than the current market price. The stock is currently undervalued and I have bullish MRVL stock predictions. You see in the following table my assumptions and fair value of MRVL stock.

Conclusion

Marvell Technology quickly recovered from the coronavirus crisis and has doubled its stock price since mid-March. It beats earning estimations in Q1 and I believe that it will keep outperforming in Q2. Because it faces growing demand for networking products and expects its storage business to bounce back in Q2. Also, the rapid development of 5G technology, the growth of the market and MRVL’s engagement with Samsung and Nokia grant the company with a powerful growth opportunity. According to the DCF model, MRVL stock’s fair value should be $57.75, which is 61% higher than its current stock price. I hold a bullish outlook for the company in 2020.

My enthusiasm is further boosted by the prediction from I Know First’s predictive AI, which gives very positive MRVL stock predictions, especially for the 1-year forecast of 103.24. This score is a clear bullish signal for MRVL.

Past Successful I Know First MRVL Stock Predictions

On June 5, 2019, I Know First Algorithm gave very bullish MRVL stock predictions, which ranked as one of the top performing predictions with a return of 53.25% in one year. The predictability also showed strong confidence that MRVL stock price was very likely to soar, which was in accordance the actual stock performance. MRVL has risen 53.25% in the forecasting time period. See charts below.

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