Marvell's Upside Is Only Limited By Supply, Analysts Say After Mixed Q2 Results

Marvell Technology Inc MRVL reported Q2 EPS of $0.57, beating the consensus of $0.56. The revenue of $1.517 billion, up 41% Y/Y, missed the consensus of $1.520 billion.

Barclays analyst Blayne Curtis reiterated an Overweight and price target of $60. He did not take much comfort in MRVL's assertion that underlying demand remains intact as he saw a material correction. 

However, the analyst writes that MRVL would see less downside than others, given more favorable end market exposure and unique content/design win tailwinds. 

KeyBanc analyst John Vinh reiterated an Overweight, citing continued outsized growth from the cloud, 5G infra, and auto, and cut price target of $75, down from $90 to reflect contracting market multiples.

MRVL posted in-line 2Q results, as robust cloud and 5G infra demand was offset by softening consumer HDD and shortage in on-premise fiber channel/ Ethernet, Vinh noted. 

3Q guidance was slightly below expectations, as supply issues and declines in wired carrier infra affected strong cloud/5G wireless demand. Beyond 3Q, MRVL expects revenues to accelerate q/q and sees a high-30% y/y revenue growth in FY23, the analyst added.

BMO analyst Ambrish Srivastava reiterated Outperform and the price target of $75. Marvell participates in the part of the market where tightness continues; hence, the company continues to see demand greater than supply. 

There was some noise around q-q changes for the various business segments, and the Enterprise Networking business will likely be up meaningfully in 3Q. Still, he believes the company expects moderation on that front. 

Needham analyst Quinn Bolton reiterated a Buy and price target of $66. MRVL's 2Q results were in line, but the company guided slightly below consensus (and above his estimate). 

Bolton highlighted that robust demand for MRVL's unique products continues, but the upside to sales expectations is limited by supply availability (particularly in high-end products like DC).

The 5G adoption is in the early innings and aiding growth. The supply improvements in Enterprise are contributing to growth. MRVL expects accelerating Q/Q growth in 4Q as supply incrementally improves and new products ramp, he noted.

The analyst believes that MRVL is a best-in-class large-cap semiconductor company with growth expected even through a potential downturn.

Raymond James analyst Melissa Fairbanks reiterated Outperform and the $80 price target as it delivered in-line results with a guide slightly below expectations as supply constraints continue to impact shipments. 

The constraints are now most severe for higher-complexity products with long manufacturing times, disproportionately affecting the Datacenter business. Of note, some pockets of supply are beginning to ease, which drove a substantial upside in Enterprise Networking. 

Demand continues to outpace supply, and MRVL is at an inflection point for the data infrastructure-based businesses – each set to benefit from market share gains and an ASP uplift from higher content/more complex platforms, he said. 

Fairbanks acknowledged the optimistic guidance. Additionally, MRVL hit several milestones in the quarter, with 5G revenue on a $600 million run-rate and total annual revenue on pace to hit $6 billion, one year earlier than planned. 

He believes MRVL is in the early stages of multiple secular growth catalysts in the datacenter, 5G, and automotive, with only supply limiting the upper end of the growth trajectory.

Price Action: MRVL shares traded lower by 8.20% at $50.57 on the last check Friday.