Marvell Technology's AI Strength May Not Be Enough To Offset Macro Softness In Q2, Analyst Cautions

Susquehanna analyst Christopher Rolland reiterated a Positive rating on Marvell Technology, Inc. MRVL, raising the price target to $70 from $60.

On Thursday, August 24, Marvell will report 2Q results and 3Q guidance.

Rolland expects generally in-line results but an uncertain guide as the growing AI opportunity may not be enough to offset continued softness in traditional networking, storage, comms infra, and consumer.

For the Data Center, while management guided to a sequential improvement in storage, the analyst read-throughs point to continued weakness around HDD/storage, perhaps suggesting a slower recovery.

The analyst also notes high telco channel inventory, which must be worked down over time.

Overall, while AI may be the singular growth driver through the year for Marvell, the analyst believes CEO Matt Murphy and the long-term growth story around strong custom ASIC and networking ramps in 2024 and beyond.

The analyst expects the company's enterprise networking to be soft, as highlighted by the management, given elevated channel inventories, macro weakness, and the shift in spend towards AI. 

The impact of an improving PC market is lower for Marvell as the company has been shifting focus from this business, the analyst adds.

For FY24, the analyst expects EPS of $1.50, raising the revenue estimate from $5.457 billion to $5.463 billion. 

For FY25, the analyst raised the EPS estimate from $2.29 to $2.32. FY25 revenue estimate is raised from $6.333 billion to $6.366 billion. 

Price Action: MRVL shares are trading higher by 2.5% to $61.09 on the last checked Wednesday.