Marvell’s (MRVL) Stock Pops After Q3 Earnings – Time to Buy?

Summary

Marvell Technology (NASDAQ: MRVL) recently got just the pop that AI investors have been waiting for. Despite it still lagging behind peers like Intel (NASDAQ: INTC) and Broadcom (NASDAQ: AVGO), the company delivered guidance that exceeded Wall Street expectations, causing a notable post-earnings stock surge. During a recent episode of The AI Investor Podcast, Eric Bleeker and Austin Smith examined Marvell’s role in custom accelerators, interconnects, and strategic acquisitions, which provide exposure to high-growth sectors like AI and data infrastructure. The 24/7 Wall St. Analysts discussed Marvell’s acquisition of Celestial AI and cite it as a strategic move to strengthen its technical capabilities.

“It’s deeply technical, but the people I respect most in this space think it’s a brilliant acquisition,” Bleeker said.

Concerns do still remain about potential loss of major XPU projects from major customers such as Microsoft (NASDAQ: MSFT), but the company’s broader interconnect opportunities are expected to mitigate risks. Overall, Marvell is seen as improving its narrative and execution, signaling a potential turnaround in investor perception.

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Transcript:

Austin Smith: This is one of the perpetual dogs. Uh, you know, Marvell Technology, and Marvell has always been mentioned in the same breath as Intel, but maybe now, you know, these American chip laggards are finally catching some, catching a break. You know, Intel in particular has had quite a run in the last six months. I think it’s up about 70% or so. Marvell has been lagging behind. Uh, but their earnings were pretty exciting. And you and I were texting about this. They initially fell after earnings, and then I think what at some point, weren’t they up 12%, 14%? They gave some of that back at the open. Um, and then they closed the day down.

I mean, sorry, down from that peak, but still up. Um, the story with Marvell has been, and you’ve talked about this. The management team has not been good on earnings. They’re not good storytellers right now. And you need to help investors understand the role that you’re playing in the landscape. And, you know, of course when you’re running a company this, you need to be an incredibly good operator, but you also need to be able to tell your story to investors on Wall Street so they understand how you’re positioned. Historically, Marvell has not done a good job explaining their role in the marketplace. So, we see some execution challenges. I’m talking historically against bigger rivals like Broadcom and other competitors. So we’ve got execution challenges, married with narrative challenges. You’ve got a laggard stock in a space that is exploding and should have a lot of potential. Now it seems like they’re finally getting their act together a little bit.

So, tell me what Wall Street and investors saw that sent those earnings up quickly after hours.

Eric Bleeker: Yeah, so Marvell is a stock I had said in prior podcasts, I would give them through this quarter to see how they execute before making a decision if that’s one that we would sell. Um, like you said, if you want to make money the past year, the number one strategy would be the moment their earnings call starts, short the stock.

Because every earnings they’re fading at, it’s a lack of specificity from management. They’re muddling what kind of opportunity they’re going to have, and Wall Street just hasn’t really been behind it. So this earnings call, they actually were down 6% before they were up as much as, I think you said 14%. And the reason is they gave concrete guidance for next year that was significantly above Wall Street’s expectations.

Now, Austin, we wanted to own Marvell for a couple reasons. One, they’re in this custom accelerator game we talked about earlier with TPUs. They’re a lot smaller—they are one 20th or now less than that of Broadcom—but they had big customers. We wanted some exposure to that if their major projects worked out. Second, they’re huge into interconnects as well, and they’re a leader and they made some great acquisitions in the past. So again, it’s kind of like there’s a rising tide and they’ve got an anchor to the bottom of the ocean, and we’re seeing if this anchor goes rust out and lets it come to the surface.

We are seeing some of that happen right now. They, like I said, their growth for next year solidly exceeds Wall Street targets. Even if there’s some reports that they might be losing business from major customers like Microsoft, they still have enough opportunity in areas like interconnects that they don’t need the custom chips that they’re building for these big customers to work out for the stock to necessarily succeed.

And they announced an acquisition, Celestial AI. It’s deeply technical, but the people I respect most in this space think it’s a brilliant acquisition. So all in all, Austin, enough from this quarter for us to keep Marvell in the portfolio. And, you know, now it’s moved to slightly positive, which if you look a few months ago, you can see how fast this narrative changes because it’s trained for about a hundred dollars a share. And I think it got down to about 50 recently. So if you’re looking at some of our recent recommendations that are dropping, just remember in the short term, narrative swings really quickly. Over a longer time frame, price is going to follow revenue growth and business growth.

Austin: Right, it’s hard to overstate how negative the sentiment around Marvell was, which is to say that in this most recent earnings call, the bar was low. They didn’t have to do much to do better, so I think that’s what we’re seeing here. Still a long expectation road ahead, but when you have these really depressed expectations, even a reasonable call can help you get a good pop like this.