Sunday, September 16, 2018

Marvell Not Getting Enough Credit For The Progress It Has Made

Marvell Technology (MRVL) isn’t quite in the clear just yet. While management has led what I believe to be an impressive turnaround since Matt Murphy became CEO in the summer of 2016, and the decision to exit mobile baseband (which occurred before the new CEO came on board) was a good one, the shares have nevertheless lagged the SOX over the past two years, with the gap having widened recently on growing concerns about the health of the recently-acquired Cavium business.

At its core, I think Marvell has a decent, if not good, business – the storage controller business is a solid cash flow generator and the company’s Ethernet business should be able to expand from its low-to-mid-range enterprise core into more attractive data center opportunities. While Cavium’s recent performance has certainly been disappointing, I think it’s premature to write off this business and the growth opportunities in areas like multi-core processors, Ethernet and fibre channel adapters, ARM processors, and security processors and adapters. I’m certainly not as bullish as the sell-side seems to be, but I think expectations are low and solid execution can drive better margins and a fair value into the low-$20s in the short term and into the mid-to-high $20s a little further down the road.

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Marvell Not Getting Enough Credit For The Progress It Has Made

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