Marvell Technology Well-Positioned For Data Center Trends, Stifel Says In Upgrade

The broad sell-off in semiconductor company shares has created an attractive buying opportunity in Marvell Technology Group Ltd. MRVL, according to Stifel.

The Analyst

Analyst Kevin Cassidy upgraded Marvell Tech from Hold to Buy and maintained a 12-month price target of $21, which is based on 14 times Stifel's estimated non-GAAP earnings per share for 2020.

The Thesis

Marvell Tech is well-positioned to capitalize on trends in data center networking even as it continues to generate solid profitability and cash flow from its legacy storage business, Cassidy said in a Thursday upgrade note. (See his track record here.) 

The company is keyed into the networking and storage markets, both of which are innovation areas for evolving data center architectures, the analyst said. 

"We see the combination of Marvell's networking leadership heritage and Cavium's multicore processors as key ingredients to become a significant player in the emerging smart network market," Cassidy said. 

Marvell's position as an agnostic component supplier in the storage market allows it to exploit trends such as emerging technologies and increased flash use in data centers and PCs while maintaining legacy business with HDDs, he said. 

Stifel expects SSD revenues, which now account for over 30 percent of the total storage segment revenue, to drive segment growth, while HDD revenues to remain flat.

"In our view, the company's management has been effective in streamlining its focus and in making operational improvements, and we believe the company can extend this successful track record to integrating the Cavium product lines," Cassidy said. 

The Price Action

Marvell Tech shares have lost about 16.73 percent year-to-date. The stock was trading up 2.6 percent to $18.18 at the time of publication Friday. 

Related Links:

Argus: 'Strong' End Markets, Cavium Acquisition Make Marvell Technology A Buy

BofA: Three Semiconductor Picks In A Choppy Market 

Posted In: Kevin CassidyStifelAnalyst ColorUpgradesPrice TargetAnalyst Ratings