Marvell’s strong Q1 drives Needham to maintain Buy stock rating By Investing.com

On Friday, Marvell (NASDAQ:) Technology Group Ltd. (NASDAQ:MRVL) stock maintained its Buy rating and $95.00 price target from Needham, following the company’s first quarter fiscal year 2025 earnings report. Marvell’s Data Center segment showed robust performance, leading to a “beat and raise” outcome for the quarter.

While the gross margins (GM) are expected to be pressured throughout fiscal year 2025 due to the ramp-up of the custom compute business, which has lower margins compared to the company’s average, the firm does not anticipate gross margins to reach the 64%+ target before fiscal year 2027.

The firm predicts that improved fixed-cost absorption and a rebound in Marvell’s traditional merchant businesses will contribute to higher gross margins in fiscal year 2026.

Additionally, the forecast for the second quarter fiscal year 2025 Data Center growth was deemed conservative by the firm, especially in comparison to the growth rates of other artificial intelligence (AI) industry participants. The guidance for a flat-to-higher optics segment also appears cautious given the existing networking supply constraints.

Looking ahead, the firm expects Marvell’s fiscal year 2025 AI revenue to exceed the previously anticipated $1.5 billion mark, with projections now set at $1.6 billion. Despite a downturn in gross margins, the firm’s estimates remain largely unchanged.

The $95 price target for Marvell’s stock is based on a 30 times price-to-earnings (P/E) multiple of the firm’s calendar year 2026 non-GAAP earnings per share estimate. This valuation reflects confidence in Marvell’s future performance, particularly in the AI and Data Center markets.

InvestingPro Insights

Marvell Technology Group Ltd . (NASDAQ:MRVL) has recently caught the attention of investors and analysts alike. According to the latest data from InvestingPro, Marvell boasts a substantial market capitalization of $66.51 billion, reflecting the scale of its operations in the tech industry. Despite a challenging environment that has seen a slight decline in revenue growth over the last twelve months, the company has managed to maintain dividend payments for 13 consecutive years, showcasing its commitment to shareholder returns. A notable increase in the company’s stock price, with a 38.16% return over the last six months and a 31.92% return over the past year, suggests a strong market confidence in Marvell’s strategic direction.

InvestingPro Tips highlight that Marvell is expected to see net income growth this year, with analysts predicting the company will turn profitable within the same timeframe. These projections are particularly relevant given the company’s current negative P/E ratio of -71.11. Additionally, Marvell operates with a moderate level of debt, which may provide it with the flexibility to navigate the fast-evolving tech landscape.

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