Marvell Technology Group Ltd. MRVL has generated significant returns for investors in the past year and has the potential to exceed expectations going ahead.
The stock has soared 60.6% last year, outperforming the industry’s gain of 44.1%.
Let’s check out the reasons for this impressive surge in share price and see why Marvell is likely to maintain the momentum next year as well.
Key Growth Drivers
We believe that strong demand for Marvell’s 4G LTE products could be a catalyst. This will be supported by growth from the company’s wide range of newly-launched Internet of Things (IoT) solutions.
Moreover, Marvell’s recent deal to acquire Cavium will expand its offerings beyond hard disk drives and microprocessors and help it to enter high growth areas such as data centers and wireless communications.
The company’s recent introduction of a comprehensive wireless product portfolio named 802.11ax is also expected to be beneficial for the top line going ahead.
Additionally, Marvell is a promising player in the solid state drive (SSD) controllers market. In the coming years, it projects an increase in the number of PCs/servers to use flash-based solid state technology for storage. The storage market is witnessing a steady rise in demand, given fast-growing data volume, especially the exponential growth in unstructured data. NAND (non-volatile storage technology) demand is likely to remain robust in 2018 as well.
Marvell is benefiting from increasing demand for SSD products. This is evident from the sequential increase in the company’s third-quarter fiscal 2018 revenues from the storage end market, which accounted for the majority of total revenues.
The company’s current restructuring initiative will also help Marvell improve cloud infrastructure and applications, which are projected to drive the top line. The latest buyback scheme also reflects sound financial position and favorable prospects.
Marvell Technology Group Ltd. Revenue (TTM)
Marvell Technology Group Ltd. Revenue (TTM) | Marvell Technology Group Ltd. Quote
Impressive Guidance
Apart from the company’s back-to-back quarters of better-than-expected bottom-line results, an encouraging fourth-quarter fiscal 2018 outlook provided on the last quarterly earnings conference call also makes us optimistic about its near-term performance.
Positive Earnings Surprise History
Marvell has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, recording a positive average earnings surprise of 10.1%.
Attractive Valuation
From a valuation perspective, the stock looks attractive as it is currently trading significantly lower than the industry average, based on a forward earnings estimate. This signifies huge upward potential. Marvell currently trades at a forward P/E of 19.3x compared with the industry group average of 22.4x.
Hence, there is still much momentum left in this Zacks Rank #1 (Strong Buy) stock, which is also evident from its long-term earnings growth rate of 16.3%.
All these positives make Marvell’s stock worth considering.
Key Picks
A few top-ranked stocks in the broader technology sector are NVIDIA Corp. NVDA, Broadcom Ltd. AVGO and Micron Technology, Inc. MU, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term EPS growth rate for NVIDIA, Broadcom and Micron is projected to be 10.3%, 13.8% and 10%, respectively.
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