On Wednesday, JPMorgan maintained its Overweight rating on Marvell (NASDAQ:MRVL) stock and increased the price target to $130 from $90, following a robust October-quarter performance, particularly in its Datacenter business.
The stock, currently trading at $95.91 with a market cap of $83 billion, has delivered an impressive 85% return over the past year. According to InvestingPro analysis, Marvell is currently trading above its Fair Value, with analysts maintaining a strong buy consensus.
The growth was attributed to the significant increase in production shipments of its AI ASICs, with notable developments in its partnerships with Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL). The company's AI ASICs are used in Amazon's Trainium 2 AI processor and Google's Axion CPU processor.
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Marvell's revenue guidance exceeded expectations, projecting a 19% quarter-over-quarter increase, compared to the consensus estimate of 13%. The guidance was buoyed by ongoing strength in the datacenter segment, including the continued ramp-up of AI ASIC programs and the introduction of next-generation 1.6T PAM4 DSP products. The company's cyclical segments are also showing signs of recovery.
The analyst highlighted Marvell's AI revenue projections for the calendar year 2024, which are expected to surpass the $1.5 billion target by a substantial margin. Marvell's execution in AI ASICs, especially with customer programs like Amazon Trainium 2 and Google Axion, has been successful, and the company has recently signed a five-year supplier agreement with Amazon Web Services. This agreement includes multi-generational engagements and is seen as a win for Marvell's next-gen 3nm AWS ASIC program, Trainium 3.
Additionally, Marvell's technology advancements were noted, including the sampling of a 3nm 1.6T optical DSP solution, which is expected to enhance their dominant market share in optical networking connectivity.
Despite gross margins being slightly below expectations due to the custom AI ASIC ramp, they remain above 60%. With current revenue of $5.28 billion and a strong YTD return of 59.6%, detailed analysis of Marvell's growth trajectory is available in the comprehensive Pro Research Report, exclusively on InvestingPro.
The company's cyclical businesses are beginning to trend upwards, and the combined momentum from AI and cyclical segments is anticipated to continue into the calendar year 2025, potentially leading to a series of positive EPS revisions. In light of these developments, JPMorgan has raised its estimates and the price target for Marvell's stock.
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