I like a lot of what Marvell (MRVL) management has been doing, including the acquisition of Inphi (IPHI) and the company’s push into custom silicon for data center/hyperscale customers. Supply constraints and uncertain timing on 5G base station deployments are headwinds, but at least relatively well-understood ones at this point.
What I haven’t liked so much has been the valuation, as the semiconductor sector has been hot on strong demand growth across multiple end-markets. Marvell provided a blink-and-you-missed-it dip around earnings, but has since filled that gap. Still, while the shares are up a strong 30% since my last update, that’s actually lagging performance relative to the SOX, as well as Broadcom (AVGO), one of Marvell’s largest competitors.
I know growth investors are fully in the driver’s seat now, and I do like the growth opportunities across Marvell’s business, including base station silicon, data center silicon, and auto Ethernet. I just don’t like the extent to which all of the good news is already in the share price. Moreover, I’d note that buying into peaking lead times for chip stocks doesn’t usually end well – it doesn’t preview a crash, but it does suggest there will be another chance to buy in at better valuations.
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Marvell's Growth Transformation Well-Reflected In The Valuation
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