Marvell slips as Wall Street weighs AI strength, legacy weakness
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Marvell Technology (NASDAQ:MRVL) shares fell nearly 4% in pre-market trading on Friday after posting largely in-line second-quarter results and guidance, while Wall Street analysts debated the company's "accelerating" opportunity in artificial intelligence with weakness in other areas.
BMO Capital Markets analyst Ambrish Srivastava, who has an outperform rating and $65 price target on Marvell (MRVL), noted that the company is likely to end fiscal 2024 with a AI-centric run-rate of more than $200M per quarter and the same for fiscal 2025 due to a jump in custom silicon to add on top of electro-optics.
"This would lead to a total greater than the $800M the company had communicated for FY25 in the prior earnings call," Srivastava wrote in an investor note. 
Bank of America analyst Vivek Arya, who has a buy rating and a $75 price target on Marvell (MRVL), said the company has an "attractive mix" of data center and infrastructure assets, including several with AI exposure, such as electro-optics, Ethernet switching and custom ASIC chips, but there is still much to be concerned about with the legacy business. 
"Ex data-center, MRVL faces macro headwinds in enterprise, 5G networking markets," Arya wrote in an investor note. 
Despite that, Arya said the company's core electro-optics franchise looks to be "nearly perfectly" correlated with the ramp in Nvidia (NVDA) AI accelerators, which may have added to management's confidence for fiscal 2024 and 2025.
"We view opportunities in custom silicon as sustainable, as the material R&D investment needed to develop an ASIC likely incentivizes hyperscalers (Google, Amazon, Microsoft, etc.) to develop a multi-generation product pipeline (positive for long-term AI demand)," Arya explained. 
Wells Fargo analyst Gary Mobley, who has an overweight rating and $65 price target on Marvell (MRVL), said while the company is still dealing with inventory digestion, it is likely to emerge faster-than-expected and in "much better shape."
"We think MRVL has the ingredients to significantly outperform the growth of the [chip market in calendar 2024]," Mobley wrote. "We believe normalization of MRVL's storage sales can [$500M in incremental revenue in fiscal 2025] (provides a GM tailwind)." 

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