Wells Fargo Upgrades Marvell As Several Catalysts Seem To Be Aligning

Marvell Technology Group Ltd. MRVL has several catalysts, including increased adoption of application-specific integrated circuits (ASIC), reaccelerating data center capital expenditure and continued improvements in the sales of traditional storage controller integrated circuits, according to Wells Fargo.

The Analyst

Wells Fargo’s Gary Mobley upgraded on Marvell Technology from Market Weight to Outperform, while raising the price target from $25 to $32.

The Thesis

An inflection point seems to have been reached in the adoption of Marvell Technology’s 5G system-on-chips (SoCs) and related Ethernet integrated circuits, due to which the company could continue to record solid 5G-basestation-related sales to Nokia and Samsung for the rest of 2019 and into 2020, Mobley said in the note.

Referring to the re-acceleration of data center capital expenditure, the analyst mentioned that this could be a near-term catalyst for Marvell Technology. He estimates growth in global data center capital expenditure to have accelerated to 19% year-on-year in the third quarter.

While the traditional hard drives (HDD) and solid state drives (SDD) business is not a contributor to Marvell Technology’s long-term revenue growth, sales of HDD/SSD controller integrated circuits could lead to modest upside in the third quarter of 2020, and HDD/SSD sales may be boosted by some inventory replenishment in the fourth quarter, Mobley added.

Price Action

Shares of Marvell Technology were up 6.40% to $26.75 at the time of publishing on Monday.