On Friday, Rosenblatt Securities increased its price target on Marvell (NASDAQ:MRVL) Technology Group Ltd. (NASDAQ:MRVL), a major player in the semiconductor industry, from $100 to $120, while maintaining a Buy rating on the stock. The firm's decision comes in the wake of Marvell's recent financial results, which showed a modest beat for the July quarter and a significantly better-than-expected outlook for the October quarter.
The improved financial outlook for Marvell is attributed to strong momentum in artificial intelligence (AI) and recoveries in enterprise networking and carrier businesses. This positive trend has led the company to raise its AI sales targets for fiscal years 2025 and 2026, with expectations now set at $1.5 billion and $2.5 billion, respectively. The heightened sales targets are supported by robust trends in electro-optics technologies and custom ASICs, which are increasingly in demand due to faster innovation cycles among customers.
Marvell's management has expressed confidence in the company's AI ASIC engagements, describing them as "multi-generational" due to the high switching costs and the limited full platform support capabilities offered by smaller competitors in Asia. The company's earlier goal of capturing 20% of the AI market share in a total addressable market (TAM) of $40 billion by 2028 seems to be progressing ahead of schedule, indicating a strong position in the market.
In light of these developments, Rosenblatt has also introduced a fiscal year 2027 Non-GAAP earnings estimate of $3.50 per share for Marvell. The new price target of $120 reflects a mid-30s price-to-earnings (P/E) multiple, which is in line with the firm's historical valuation range for high-quality AI companies. The updated valuation underscores the firm's confidence in Marvell's growth trajectory and its role in the AI sector.
In other recent news, Marvell Technology Group Ltd . exceeded Q2 expectations with a strong financial performance, reporting revenue figures of $1.27 billion primarily driven by a record revenue of $881 million from the data center end market. The company also showcased a GAAP gross margin of 46.2% and a non-GAAP gross margin of 61.9% in Q2, and managed to reduce inventory by nearly 20% YoY, generating $306 million in cash from operations. Looking forward, the third-quarter revenue forecast is approximately $1.45 billion, with a GAAP gross margin of 47.2% and a non-GAAP gross margin of 61%.
Marvell Technology is expected to capitalize on robust investments in artificial intelligence (AI) by scaling its AI application-specific integrated circuit (ASIC) business. Analysts from Citi maintained a Buy rating for the company, predicting that Marvell's CEO, Matt Murphy, will present an optimistic view on the company's AI growth at the upcoming Citi Technology Conference.
The company also anticipates significant sequential growth across all end markets in the third quarter and is confident in exceeding its full-year AI revenue target.
Another important development is the company's plan to increase stock repurchases in the third quarter. Furthermore, Marvell is well-positioned in the data center switching market with their 51.2T silicon and maintains a high market share in the DSP and optics market.
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