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Marvell (MRVL) Looks Bright Post Q3 Earnings: Time to Buy?


A successful investor understands the importance of adding well-performing stocks to the portfolio at the right time. Indicators of a stock’s bullish run include a rise in share price and strong fundamentals.

Marvell Technology Group Ltd. MRVL is one such technology stock that has been on healthy growth trajectory, of late. It has rallied 61.9% year to date, outperforming 56.8% growth recorded by the industry it belongs to.

With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick at the moment. Let’s delve deeper into the factors that make this stock an attractive investment option.

Good Projections

The company reported better-than-expected third-quarter fiscal 2018 (ended Oct 28, 2017) results. The company reported non-GAAP earnings of 34 cents per share, outpacing the Zacks Consensus Estimate by a penny. Reported earnings were far better than the year-ago figure of 21 cents.

Although Marvell’s revenues declined 1.2% year over year to $616.3 million, it surpassed the Zacks Consensus Estimate of $613 million. Moreover, reported revenues came ahead of the mid-point of management guided range of $595-$625 million (mid-point $610 million).

The company provided an encouraging forthcoming guidance. It also anticipates fourth-quarter 2018 revenues in the range of $595-$625 million (mid-point $610 million). The Zacks Consensus Estimate was pegged at $595 million.

The company anticipates non-GAAP earnings per share in the band of 29-33 cents (mid-point 31 cents) while the Zacks Consensus Estimate was pegged at 28 cents.

Additionally, the company’s strong cash balance position bolsters our confidence in the stock.

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%. Further, it has a long-term expected EPS growth rate of 14.6%.

Other Growth Drivers: Though the macro headwinds and stringent regulations might put the financials under pressure in the near term, we believe that the 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.

In an effort to expand offerings beyond hard disk drives to high growth areas such as data centers and wireless communications, Marvell recently entered into an agreement to acquire Cavium. The buyout will provide the company an opportunity to expand offerings and access newer markets.

Going forward, Marvell’s current restructuring initiative will help it 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.

Other Key Picks

Other top-ranked stocks in the broader technology space are NVIDIA Corporation NVDA, Intel Corporation INTC and DXC Technology Company. DXC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS growth rates for NVIDIA, Intel and DXC are 11.2%, 8.4% and 10.5%, respectively.

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