New Price Target for This AI and Networking Chip Holding
We are lifting our price target on Marvell Technology ($MRVL) shares to $240 from $210 to account for the company’s revised multi-year guidance. Fueling that revised outlook is robust demand prospects across its AI and data center as well as custom AI silicon business, but also for its networking chips. Marvell lifted its outlook earlier this year, but the revised guidance Wednesday night once again cleared multi-year consensus expectations.
Breaking down that new outlook:
The data center business is expected to grow ~ 50% in the current fiscal year with the interconnect business now slated to grow more than 70% year over year, well above the prior guidance that called for 50% growth. Marvell’s revenue for the current quarter is projected to grow double digits sequentially, with at least 10% sequential growth in each of the following two quarters. Some back-of-napkin math puts that revenue at $11.5 billion for the current fiscal year that ends in January 2027.
Looking further out, Marvell noted its data center revenue growth in fiscal 2028 is expected to pick up to ~55% year over year. The communications end market is still slated to deliver low single-digit percentage revenue growth in fiscal 2028. Putting those pieces together, total company revenue is forecasted to grow approximately 45% in fiscal 2028, which implies ~ $16.5 billion, roughly $1.5 billion higher than management’s prior guidance and the market consensus.
On the topic of Marvell’s custom AI silicon business, management said it has won several new designs during the quarter, and those sockets are expected to start contributing incremental revenue following their typical development cycle of approximately two years. With that, Marvell reiterated its $10 billion custom revenue target for fiscal 2029. As we think about that, consider that Marvell’s new total revenue target for this year is $11.5 billion. Let that sink in.
As you do, let’s also mention the comment from Marvell Chairman and CEO Matt Murphy that confirmed our view on the growing demand for networking:
“Now in the early stages of generative AI, the primary focus was on addressing compute and memory bottlenecks. As more complex architectures such as reasoning modules and mixture of experts have begun to deploy, the role of networking has become significantly more important, and this is the key driver of the increased demand we are seeing today for our scale-out networking products.“
We see that as a big positive not only for MRVL shares, but also for Broadcom ($AVGO), which reports next week, Nvidia ($NVDA) and Arista Networks ($ANET).
Why Is the Stock Down?
So why are MRVL shares trading off Thursday if we’re raising our price target and others are too?
Arguably because of the guidance served up for the current quarter that comprises $2.57 billion- $2.84 billion in revenue vs. analyst expectations of $2.6 billion, and EPS of $0.88-$0.98 vs. the $0.90 market consensus. Good numbers but not as high as the upper end of the consensus range, or ones that reflect the massive run in the shares over the last few months.
We will continue to play the long game with Marvell, especially since we are still in the first third of the ball game. With that in mind, we will continue to track monthly revenue reports from Taiwan Semi ($TSM) and Foxconn as well as AI and data server shipments from Dell ($DELL) and HPE ($HPE).
As we reset our price target to $240, we will also reset our checkpoint for MRVL shares at $160. In keeping with our Two rating, if MRVL shares retreated to the 20-day moving average near $178 that would be a nice pick-up point.
At the time of publication, TheStreet Pro Portfolio was long ANET, AVGO, MRVL and NVDA.
| Symbol | Price Target |
|---|---|
| MRVL | 240 |
| Symbol | Panic Price |
|---|---|
| MRVL | 160 |
