Marvell Technology Inc.’s latest round of gloomy guidance didn’t necessarily come as a shock, but the company’s cautious commentary on a recovery in the second half of the year might have.
That’s according to Evercore ISI analyst CJ Muse, who was still willing to give the company a pass as it took a more measured stance over the coming quarters.
‘Management’s more subdued tone for [second-half] recovery could come as a negative surprise, but after three negative revisions it seems clear that a cautiously conservative view really makes sense at this point,” he said in a note to customers who track Marvell’s MRVL,
Earnings report Thursday afternoon.
Read more: Marvell stock falls after inventory corrections weigh on earnings forecast
Muse maintained its outperform rating for Marvell stock in the wake of the gains, writing that “estimates are clearly bottoming out” with potential for continued strength in areas like 5G and autos, as well as the possibility of a data center recovery in the second half of the calendar year.
Raymond James analyst Srini Pajjuri agreed that it was “not entirely surprising” that Marvell fell short on its revenue forecast, but noted that the “weaker outlook for gross margin and the slowdown in the uptake of cloud-optimized products were unexpected.”
He also continued to believe in it, reiterating an outperform rating and adding that while he was “disappointed” by the outlook, in his opinion Marvell’s “margin problems are temporary”.
However, Marvell’s stock took a beating during Friday’s session, falling 8% in the morning action.
“An in-line printout (following last quarter’s big guidance cut) was overshadowed by another drop as Marvell’s inventory correction continues,” TD Cowen’s Matthew Ramsay wrote. “Added to the near-term negative vectors, mix is weighing on gross margin and paused buyback pressure [earnings per share].”
Ramsay reiterated his outperform rating for Marvell’s stock, though he lowered his target price from $55 to $50.
UBS analyst Timothy Arcuri positively noted that the latest report de-risks Marvell’s estimates “even further”, and that the company “still has new content locked away from major cloud customers”, while “shipments are a matter of when, not if .”
At the same time, he noted that Thursday’s report caps the second case “where Marvell was overly optimistic, so the stock may very well remain in the penalty box until investors can regain confidence in management’s guidance and commentary.”
He maintained his buy rating for the stock and lowered his price target from $75 to $60, but said “the number of growth vectors here is still very high for a company that is still not very large compared to most peers.”
Analysts are almost unanimously bullish on Marvell: Of the 31 tracked by FactSet covering the stock, 28 have a buy rating and three hold ratings, with an average price target of $56.74, about a third above current levels.
