Shares of Marvell Technology (NASDAQ:MRVL) surged nearly 17% in Thursday’s extended trading session, as the chip company announced upbeat fiscal first-quarter results and a solid outlook. In particular, the company expects its artificial intelligence (AI) revenue to at least double in the current fiscal year. MRVL stock rose 7.6% in Thursday’s regular trading, as larger rival Nvidia’s (NVDA) commentary about robust AI chip demand triggered a rally in semiconductor stocks.
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Marvell’s revenue declined 9% year-over-year in the first quarter of Fiscal 2024 (ending April 29, 2023) to $1.32 billion, as data center revenue fell due to lower storage business. The top line was also hit by a decline in consumer-end market revenue. Adjusted EPS plunged 40% to $0.31 due to lower revenue and higher expenses. Nonetheless, both revenue and adjusted EPS surpassed analysts’ estimates of $1.30 billion and $0.29, respectively.
Impressive AI Demand
Marvell expects sequential revenue growth in the fiscal second quarter, with data center storage revenue resuming growth. Further, the company anticipates cloud revenue to grow over 10% sequentially in Q2 FY24. Overall, Marvell projects Q2 FY24 revenue in the range of $1.33 billion, plus or minus 5%. Adjusted EPS is expected to come in at $0.32, plus or minus $0.05. The midpoint of the company’s Q2 FY24 revenue and EPS guidance was better than Wall Street’s estimates of $1.31 billion and $0.30, respectively.
Marvell sees sequential revenue growth to accelerate in the second half of FY24. The company expects AI revenue in full-year FY24 to at least double compared to $200 million in the previous fiscal year. Overall, it projects AI revenue to increase at a compound annual growth rate (CAGR) of more than 100% over the FY23 to FY25 period.
“AI has emerged as a key growth driver for Marvell, which we are enabling with our leading network connectivity products and emerging cloud optimized silicon platform,” said Matt Murphy, Marvell’s President and CEO.
Is Marvell a Good Stock to Buy?
Following the Q1 print, Rosenblatt Securities analyst Hans Mosesmann noted that Marvell delivered a “slight” beat relative to expectations, with cloud and AI-related projects (PAM4, some ASICs, and switching) trending stronger amid improvements in non-AI areas that are still dealing with continued inventory drawdowns.
“MRVL remains our top secular idea along with NVDA. Now that the overhead of inventory concerns has been lifted and AI momentum is emerging the story is cleaner from here on out,” said Mosesmann. The analyst reiterated a Buy rating on MRVL stock with a price target of $100.
Wall Street’s Strong Buy consensus rating is based on 23 Buys and two Holds. The average price target of $56.26 implies 13.7% upside.
