After Earnings, Is Marvell Stock a Buy, a Sell, or Fairly Valued?

Marvell Technology MRVL released its fourth-quarter earnings report on March 5. Here’s Morningstar’s take on Marvell’s earnings and stock.

Key Morningstar Metrics for Marvell Technology

• Fair Value Estimate: $90.00
• Morningstar Rating: ★★★★
• Economic Moat: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Marvell Technology’s Q4 Earnings

Marvell’s fiscal fourth-quarter results came in line with management guidance ranges. Revenue rose 27% year over year to $1.82 billion. April-quarter guidance implies another quarter of strong year-over-year revenue growth, with a midpoint of $1.875 billion.

Why it matters: Marvell’s results met our above-consensus expectations. While April-quarter guidance lightly missed our optimistic model, it aligns with our view that robust demand will continue into fiscal 2026.

• Data center and artificial intelligence sales are Marvell’s primary drivers, and increasingly becoming the dominant piece of the business. In our view, Marvell is well-positioned to capture market share and see rapid long-term growth across both custom AI accelerators and data center optical networking.
• Marvell’s cyclical carrier infrastructure and enterprise businesses look to be solidly rebounding after several quarters of steep declines that we attribute to inventory digestion at customers. We expect these markets to see a strong bounce back over the next few years.

The bottom line: We maintain our fair value estimate of $90 per share for Marvell. We believe our long-term thesis for strong growth and organic market share gains in custom accelerators and AI networking infrastructure is intact.

• We now see shares as undervalued, after selling off 15% after hours following results. We attribute the drop to the results and guidance meeting rather than beating expectations. We advise investors to look past the market overreaction and focus on a strong position and a high growth trajectory.
• AI is the most significant driver of our forecast for Marvell. Our estimates assume 80% growth in AI revenue in fiscal 2026, approaching $3.5 billion and coming in well above management’s April 2024 target of $2.5 billion.

Fair Value Estimate for Marvell Technology

With its 4-star rating, we believe Marvell stock is undervalued compared with our long-term fair value estimate of $90 per share, which implies a fiscal 2026 price/adjusted earnings multiple of 30 times and an enterprise value/sales multiple of 10 times, along with a 3% free cash flow yield. The primary driver of our valuation is growth in data center revenue.

We expect 24% sales growth for Marvell over the next five years, primarily from organic share gains as it flexes its portfolio for growing applications in data centers and artificial intelligence. We expect it to take organic share across most of its end markets, but for its largest win rate to come in the data center. We anticipate its consumer portfolio will wind down gradually as part of the business over the long term.

Read more about Marvell Technology’s fair value estimate.

Economic Moat Rating

We assign Marvell a narrow moat. In our view, the firm holds intangible assets in networking chip design that enable it to compete at the cutting edge and defend its competitive position from well-capitalized competition, and it also benefits from switching costs. We expect Marvell to earn excess returns on invested capital, more likely than not, over the next 10 years.

To us, intangible assets in networking chip design come in the form of engineering expertise, both in terms of silicon design and integration with complementary hardware and customer networking topologies. In our view, Marvell’s billions of dollars of cumulative R&D over the past decade have created a portfolio of differentiated intellectual property it can draw from to build custom and semi-custom designs for myriad applications and customers.

Read more about Marvell Technology’s economic moat.

Financial Strength

We expect Marvell to focus on deleveraging with its free cash flow. As of January 2025, the firm carried $948.0 million in cash and $4.1 billion in total debt, largely taken on to acquire Inphi in calendar 2021. We expect Marvell to stay leveraged but pay down debt as it matures. We forecast the firm’s free cash flow generation to ramp up past $3.0 billion a year by fiscal 2030, up from $1.4 billion in fiscal 2025, as it expands the top line. We think Marvell will fund obligations and organic investment with cash flow and have enough left over for share repurchases on top of its steady dividend. Marvell also has a $750 million revolver available if it encounters a liquidity crunch.

Read more about Marvell Technology’s financial strength.

Risk and Uncertainty

We assign a High Uncertainty Rating to Marvell. We view the firm as prone to cyclicality in its end markets, arising from cloud capital expenditures, 5G buildouts, and the cyclical storage drive market. Though we believe Marvell’s moat and content growth opportunity help it to smooth over some cyclicality, it can be vulnerable to downturns in end customer spending.

We foresee Marvell facing continued competition in its end markets from well-capitalized competitors. Our valuation assumes Marvell can defend its current share in data centers and 5G networks and win greater wallet share at customers with its processors and optical chips.

Read more about Marvell Technology’s risk and uncertainty.

MRVL Bulls Say

• Marvell’s strong position in optical chips and its burgeoning custom chip business offer a strong foothold into generative AI infrastructure, which should fuel high growth.
• Marvell’s strong non-GAAP profitability reflects moaty pricing power, in our view.
• We believe Marvell’s wide portfolio of switches, processors, and optical chips gives it ample opportunity for cross-selling and share gains.

MRVL Bears Say

• Marvell remains a distant second to Broadcom AVGO in networking chip market share and will face an uphill battle overcoming its customer relationships.
• Marvell’s end markets are cyclical and can be prone to downturns.
• Marvell still has a solid portion of sales going into storage drives, which we think are less differentiated.

This article was compiled by Gautami Thombare.