On Friday, Barclays (LON:BARC) adjusted its outlook on Marvell (NASDAQ:MRVL), increasing the price target to $80.00 from the previous $75.00. The firm has sustained its Overweight rating on the shares. This adjustment reflects a mixed perspective on the company's financial health and prospects.
The analyst from Barclays highlighted that Marvell's core business is experiencing a deeper correction than anticipated, which has led to a delayed recovery. However, there is a silver lining as the company's artificial intelligence (AI) application-specific integrated circuit (ASIC) revenue stream appears to be stronger than expected.
Marvell has indicated that it anticipates over $500 million in revenue from AI ASICs in fiscal year 2025, with a substantial increase projected for fiscal year 2026, where the analyst's model suggests revenue could reach $1.44 billion.
This significant growth in the AI ASIC segment is expected to offset the lower margins in the second half of the year, which are forecasted to average 61% due to a shift in product mix and increased operational expenses related to tapeout costs.
The Barclays analyst also pointed out that while the overall earnings per share (EPS) estimates on the Street may require adjustments to accommodate the growing AI ASIC figures for 2025, the robust ramp-up in this area is likely to become a reality. Additionally, the analyst predicts that the operating profit margin (OPM) should improve as the AI ASIC business grows alongside the recovery of Marvell's core operations.
In summary, despite some challenges in the core business, the expansion and strength of the AI ASIC segment are expected to play a pivotal role in Marvell's financial performance in the coming years.
InvestingPro Insights
Following the recent analysis by Barclays on Marvell's financial outlook, data from InvestingPro further enriches the picture for investors considering the company's shares. With a market capitalization of $66.51 billion and a notable six-month price total return of 38.16%, Marvell's market performance reflects significant investor confidence. Additionally, the company's commitment to shareholder returns is evident through its consistent dividend payments over the past 13 years, a reassuring sign for income-focused investors.
An InvestingPro Tip highlights that analysts predict Marvell will be profitable this year, aligning with Barclays' optimistic view on the company's AI ASIC revenue stream. Moreover, the company's recent strong one-month price total return of 16.6% underscores the positive market sentiment following its strategic focus on high-growth areas like AI ASICs.
For those seeking a deeper dive into Marvell's financials and future prospects, InvestingPro offers additional tips, including insights on the company's moderate level of debt and valuation multiples. To access these insights and more, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 8 more InvestingPro Tips available, investors can gain a comprehensive understanding of Marvell's investment potential.
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