Marvell Results Strong Under New Management, Says Brean

Marvell Technology Group Ltd. MRVL reported strong F4Q16 results. Brean Capital’s Mike Burton reiterated a Buy rating on Marvell, with a price target of $12.50, saying that the company’s new strategic plans were impressive.

The company reported its quarterly EPS at $0.11, beating the consensus estimate of $0.09. Marvell missed revenue expectations and reported a 9 percent sequential decline due to a 34 percent decline in its Mobile and Wireless business, from which the company plans to exit, analyst Mike Burton stated.

The Storage segment recorded 12 percent sequential revenue growth, backed by improved demand from HDD customers and seasonality. The Networking business grew 8 percent due to broad-based demand across all products.

Seasonal Decline Anticipated

Management mentioned that revenues may decline in the April quarter from the $616mn reported for the latest January quarter. Moreover, Marvell indicated planned cost cuts and margin expansion, which should boost gross margins and opex trends, similar to the margins profiles of some of the company’s current semiconductor peers.

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Impressive New Management Team

“We were impressed on the company’s new strategic plans on the product side to focus on core markets…We believe the deck is cleared for MRVL going forward as the company is now able to focus on its existing business prospects with its new highly talented management team,” Burton wrote.

The revenue and non-GAAP EPS estimates for the April 2016 quarter have been reduced from $613M to $566M and from $0.07 to $0.05, respectively. The revenue estimate for CY16 has been lowered from $2.47B to $2.28B, while the non-GAAP EPS forecast has been raised from $0.35 to $0.40. The revenue estimate for CY17 has been lowered from revenue from $2.40B to $2.23B, while the non-GAAP EPS forecast has been raised from $0.35 to $0.84.

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