Marvell Technology Group Ltd.: A 5G Stock You Likely Haven’t Considered
This Could Be the “Next Big Thing”
It’s no secret that investors like tech stocks because they represent some of the fastest-growing businesses. And right now, one of the things that could take many tech companies’ growth potential to a whole new level is 5G.
You see, when we moved from 3G to 4G mobile networks, data transmission got quite a bit faster. But 5G will be at a whole other level: if the transition from 3G to 4G seemed like an evolution, the move to 5G will feel like a revolution.
To give you an idea, most of the 4G networks top out at transmitting 100 megabits of data per second. 5G networks, on the other hand, are capable of reaching 10 gigabits per second in speed, which would be 100 times faster than 4G.
Needless to say, moving to the 5G era would create plenty of monetizing opportunities.
People have been searching for the best 5G stocks for quite some time. And there are many companies well positioned for the upcoming 5G adoption.
For instance, wireless carriers such as AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), chipmakers such as Qualcomm, Inc. (NASDAQ:QCOM), and smartphone makers like Apple Inc. (NASDAQ:AAPL) have all received more investor attention due to their potential roles in the 5G era.
Today, though, I want to talk to you about a much lesser-known 5G stock: Marvell Technology Group Ltd. (NASDAQ:MRVL).
Marvell Technology Group Ltd.
The first thing to note about Marvell is that, while most people have never heard of it, the company is not some small start-up. The Santa Clara, California-based semiconductor company has been around since 1995 and has already built a solid presence in its industry. (Source: “About Marvell,” Marvell Technology Group Ltd., last accessed October 30, 2019.)
Today, Marvell holds more than 10,000 patents and has major research and development centers in the U.S., China, Germany, Israel, and India.
To get an idea of where this company stands in the tech world, let’s take a look at its most recent financials.
In the second quarter of Marvell’s fiscal-year 2020, which ended August 3, 2019, the company generated $657.0 million of revenue, which was above the midpoint of its own guidance range issued in the previous quarter. (Source: “Marvell Technology Group Ltd. Reports Second Quarter Of Fiscal Year 2020 Financial Results,” Marvell Technology Group Ltd., August 29, 2019.)
The company was also profitable in the second fiscal quarter; its adjusted net income came in at $110.0 million, or $0.16 per diluted share. During the quarter, Marvell Technology generated $73.0 million in operating cash flow.
Of course, these numbers don’t look that impressive compared to the big players in the tech world. However, once 5G is in full swing, Marvell Technology’s business could get a serious boost.
During MRVL’s latest earnings conference call, the company’s President and Chief Executive Officer Matt Murphy said, “Based on the design wins we have secured so far and using industry analyst forecasts for base station units, we are holding our customers market share at the current positions, we estimate that in a few years our 5G revenue potential can exceed $600 million per year.” (Source: “Marvell Technology Group Ltd.’s (MRVL) CEO Matt Murphy on Q2 2020 Results – Earnings Call Transcript,” Seeking Alpha, August 29, 2019.)
Of course our revenue potential can flex above this if our lead customer is able to gain share as they drive towards their long-term goals and from additional design wins which we are currently pursuing within our comprehensive 5G platform to address baseband, transport, switching, front-haul and Massive MIMO opportunities at multiple base station OEMs.
Again, a $600.0-million increase to the annual top-line number doesn’t seem like a big deal compared to what the mega-cap tech giants achieve. For instance, if Apple releases a 5G “iPhone,” it will probably boost its annual revenue by more than $600.0 million.
The thing that makes MRVL stock special is what the 5G rollout could do to the company’s sales, compared to where the sales figures are today.
You see, in Marvell Technology’s most recent fiscal year, which ended February 2, the company’s net revenue totaled almost $2.9 billion. (Source: “Marvell Technology Group Ltd. Reports Fourth Quarter And Fiscal Year 2019 Financial Results,” Marvell Technology Group Ltd., March 7, 2019.)
Therefore, if things go as management planned and Marvell Technology earns an additional $600.0 million a year from 5G revenue, it would achieve a top-line growth rate of more than 20%. And that should be a number good enough to cheer up investors.
Marvell Technology Group Ltd. (NASDAQ:MRVL) Stock Chart
Chart courtesy of StockCharts.com
As you can see from the above chart, Marvell stock is already traveling on an upward path, surging more than 50% over the past 12 months. What the company plans to do in the 5G era could very well keep MRVL stock on that uptrend.
As it stands, Marvell Technology Group Ltd. is one of the top 5G stocks to consider.