Don't Expect Many Surprises From Marvell Technology's Q2 Earnings

Cowen urged investors not to expect many surprises from the second quarter results of Marvell Technology Group Ltd. MRVL. But, the brokerage expects a solid guidance (particularly EPS) to drive Street estimates higher again.

"See no surprises and if anything a smidge of upside to Street revs/EPS $630MM/$0.11 (non-GAAP) given that MRVL guided FQ1 with less than a week remaining in the Q," analyst Timothy Arcuri wrote in a note.

The analyst expects storage segment and networking revenues to grow 2 percent. However, mobile & wireless are expected to fall 41 percent due to exit of mobile handset.

For the third quarter, Arcuri said the Street revenues/EPS (non-GAAP) $641 million/$0.14 is likely on low side and he model EPS of $0.18 on better-than-expected performance in storage and cost savings.

"Relative to forward commentary regarding new CEO Matt Murphy's new "grand plan", initial focus remains on data intensive R&D justification and the degree to which it can be cut (we think ~$250-300MM cut (~$0.55-0.60 EPS) is a veritable layup with $400MM possible)," Arcuri highlighted.

Broadcom Ltd AVGO as he thinks Marvell is picking up some share by not matching AVGO price increases and benefiting from Toshiba gains.

The analyst would also focus on any color on gross margin improvement as management already hinted that 60 percent is not out of the question and updates on "grand plan."

"Full communication of the "grand plan" might still take time, but even pedestrian assumptions yield ~$1.20-$1.30 EPS power and some smart slicing/dicing of current business and maybe smart M&A with its cash mountain could add a lot more growth," Arcuri added.

Arcuri reaffirmed his Outperform rating and $15 price target on the stock.