Marvell: Fast-Growing Large-Cap Stock Should See Multiple Expand

Marvell Technology is a fabless semiconductor supplier of high-performance standard and semi-custom products with core strengths in developing and scaling complex SoC architectures, mixed-signal and digital signal processing functionality. MRVL was founded in 1995, the company has more than 6,700 employees and is headquartered in California, USA.

The company's revenue for 2023 is expected to be $6.2 billion, with a fairly high gross margin of 65% compared to competitors, a market capitalization of $56.0 billion, with a steadily growing revenue and FCF. The latter will make it possible to implement the buyback program in the future and provide an FCF yield of 5.1% already in 2024.

Investment theses:
  • Marvell trades at attractive estimated P/E next year multiples of 16.5 X, much lower its own historical average. However, MRVL has an attractive PEG ratio of 1.0X.
  • Marvell targets one of the highest long-term revenue growth rates among large capitalization companies in the semiconductor industry.
  • Company has a favorable end-market exposure to data -center infrastructure. The latter is one the most robust end-markets from a growth perspective as the continued digitalization of business models and a multitude of technology inflections (+20% CAGR).
  • Marvell has a powerful team of managers who have been working in company for a long time. The team has successfully dealt with challenges in supply chain compared to competitors.
  • Overall, semiconductors generally outperform tech companies when inflation is high and falling what is suitable for next year investing.

Marvell remains our top pick among fabless semiconductor suppliers benefiting from the continuing date-center & cloud growth and transition to increasing complexity of semiconductor custom design to meet all customer needs. We're overweight MRVL due to high exposure to long-term secular trends and strong financials, which still provide reasonable upside.

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