Citi: Sell Marvell, It's A 'Value Trap'

In a report published Friday, Citi analyst Atif Malik initiated coverage of

with a Sell rating and $13 price target. The stock has underperformed the SOX year-to-date, while the company's PC and emerging market handset businesses appear to have weak fundamentals. The analyst believes that if the company were to divest its mobile and wireless business, which is losing money, it could prove accretive to the EPS. However, the company is unlikely to sell out of this segment, especially given that the business' IP "is more ingrained in other end markets like networking" and Marvell Technology sees growth opportunities in China. The analyst expects the company to face challenges to delivering growth in C15/16. "After outgrowing the chip industry over the last ten years by 5 percent, we model MRVL's revenue growth to decelerate and underperform the industry by 3 percent in the next 2-3 years," Malik said. "We do not view MRVL as a viable long-term cellular baseband provider in 4G handset market given fierce pricing competition… and weak positioning at flagship handset makers," the Citi report added.