On Friday, the semiconductor company Marvell (NASDAQ:MRVL) Technology Group Ltd. (NASDAQ:MRVL) stock maintained its Outperform rating according to an analyst at Raymond James.
The analyst's assessment is based on expectations of a slight upside to the company's first fiscal quarter and a largely in-line forecast for the second fiscal quarter.
The positive outlook is attributed to better-than-expected performance in the Data Center sector, driven by Optical Connectivity and a gradual recovery in Storage.
Marvell is experiencing strong demand for its 400/800G products, bolstered by the growth of AI clusters. The company is also poised to benefit from its new 5nm DSP (Perseus). The transition to 1.6T technology and the adoption of Application-Specific Integrated Circuit (ASIC) are anticipated to sustain this momentum.
Furthermore, Marvell has made significant inroads with three hyperscalers, particularly with Google (NASDAQ:GOOGL)'s Axion and Amazon (NASDAQ:AMZN)'s Trainium 2, and is on track to generate approximately $500 million in revenue this year from these engagements.
Management at Marvell has indicated that its custom silicon wins are expected to be multigenerational, which suggests a long-term revenue stream. Consequently, the company is likely to reiterate its revenue targets for calendar years 2024 and 2025, aiming for $1.5 billion and $2.5 billion respectively, with AI-related sales projected to comprise about 35% of its total revenue by 2025.
Despite steep cyclical declines in the Enterprise and Carrier segments, the analyst expects the first fiscal quarter to represent the low point for these areas. With Marvell's leadership in Optical Connectivity and opportunities in Custom Silicon, along with mitigated risks in the Carrier and Enterprise sectors, the stock is deemed to have an attractive risk/reward profile.
The company's stock is currently trading at approximately 31 times its projected earnings for fiscal year 2026. Raymond James has reiterated its Outperform rating on Marvell, signaling confidence in the company's future performance.
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