Marvell Technology Group Ltd.: Overlooked 5G Stock Looks Bullish in 2021

Marvell StockMarvell Stock at Record Levels But Still Has Lots of Room to Run

Marvell Technology Group Ltd. (NASDAQ:MRVL) is a semiconductor and 5G stock I’ve been following for a while now. And while MRVL stock is trading at record levels, which might scare off some investors, there are plenty of reasons to keep this 5G stock on your radar in 2021.

First, Marvell Technology Group Ltd. is a leading infrastructure semiconductor company that operates in a number of high-growth areas, including 5G, cloud computing, artificial intelligence (AI), and the Internet of Things (IoT). All of which have been experiencing massive growth.

Second, the company continues to report strong revenue growth, which has helped juice its share price. Marvell stock is up 51.7% over the last six months, 13.6% year-over-year, and 223.1% since the stock market crashed in March 2020.

MRVL stock has actually been on a tear for five years now. Between 2016 and 2020, Marvell stock advanced 485%, expanding at a compound annual growth rate of 42.4%.

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Third, Marvell Technology Group Ltd. is about to close on a $10.0-billion acquisition that will expand its market opportunity in the cloud data center and 5G end markets.

Chart courtesy of StockCharts.com

MRVL Stock Overview

Marvell Technology Group Ltd. moves, stores, processes, and secures the world’s data with semiconductor solutions. And it does it faster and more reliably than anyone else.

Thanks to the company’s deep knowledge, storied history, and leading intellectual property, Marvell’s semiconductor solutions have been transforming the automotive, cloud, consumer, enterprise, and industrial markets. (Source: “Investor Relations,” Marvell Technology Group Ltd., last accessed January 27, 2021.)

The company’s industry-leading position is expected to continue and drive its long-term growth. That includes the massive increase in demand for data, bandwidth, power efficiency, and end-to-end security.

Not only is 5G technology still in its infancy, but COVID-19 has put enormous pressure on companies like Marvell to create powerful semiconductors that make it easier for the millions of people around the world who are dependent on reliable online connections. This only happens because data centers with powerful semiconductors are keeping the world online.

Marvell to Acquire Inphi Corporation

On October 29, Marvell announced that it’s acquiring Inphi Corporation (NASDAQ:IPHI), a leader in high-speed data movement. The deal is expected to close in the second half of 2021. (Source: “Marvell to Acquire Inphi – Accelerating Growth and Leadership in Cloud and 5G Infrastructure,” Marvell Technology Group Ltd., October 29, 2020.)

Marvell said that, with the transaction, it intends to reorganize so the combined entities will be located in the U.S. That move will create an American semiconductor juggernaut with an enterprise value of roughly $40.0 billion.

Over the years, Marvell has transformed itself into a data infrastructure giant with its storage and computing portfolio. The company also has a strong foothold in copper networking chips that are used in enterprise and automotive applications.

With the Inphi acquisition, Marvell Technology Group Ltd. gains a strong position in optical networking chips that are used to help data move faster in cloud data centers and in wired and wireless carrier networks.

The transaction is expected to generate annual run-rate synergies of $125.0 million, which will be realized within 18 months after the deal closes. The transaction is expected to become accretive to Marvell’s adjusted earnings per share by the end of the first year after the deal closes.

Strong Third-Quarter Results

In December, Marvell announced that its revenue for the third quarter ended October 31, 2020 increased 13.2% year-over-year to $750.0 million. (Source: “Marvell Technology Group Ltd. Reports Third Quarter of Fiscal Year 2021 Financial Results,” Cision PR Newswire, December 3, 2020.)

The company reported a third-quarter net loss of $22.9 million, or $0.03 per share, a big improvement over the third-quarter 2019 net loss of $82.5 million, or $0.12 per share.

Marvell’s adjusted net income came in at $168.0 million, or $0.25 per share, a 50% increase over the third-quarter 2019 adjusted net income of $112.0 million, or $0.17 per share.

Cash flow from operations for the third quarter was $258.0 million. The company ended the third quarter with cash and cash equivalents of $832.0 million.

Matt Murphy, Marvell Technology Group Ltd.’s president and CEO, said the following about the results:

Marvell continued to deliver strong revenue growth in the third fiscal quarter. Overall revenue increased 13% year on year, driven by our networking business, which grew revenue 35% year on year. Strong 5G and Cloud product ramps are fueling our ongoing success in these strategic growth markets. Demand continues to increase, and we are guiding fourth fiscal quarter revenue at the mid-point to grow approximately 5% sequentially.

(Source: Ibid.)

Analyst Take

Marvell Stock is a wonderful semiconductor stock for the 5G era.

Thanks to the growing demand related to 5G and cloud computing, Marvell Technology Group Ltd.’s blockbuster acquisition of Inphi Corporation will make Marvell an even better 5G company—and could lead MRVL stock to keep climbing.