Marvell stock price analysis after Q4 earnings: buy the dip?

Investors should read the post earnings decline in Marvell Technology Inc (NASDAQ: MRVL) this morning as an opportunity to buy a quality name at a deep discount, according to Loop Capital analyst Gary Mobley.

On Thursday, the semiconductor giant came in ahead of Street estimates for its fourth quarter and issued upbeat guidance for the future.

Still, Marvell stock lost as much as 20% today – prompting Mobley to raise his rating on it to “buy” with upside to $110 that indicates potential for a more than 50% gain from current levels.

Why did Marvell stock crash on Thursday?

Marvell shares are in the red this morning primarily because investors had expected more from the company that makes custom AI products for Amazon Web Services.

Working with the tech behemoth, they had hoped, will result in a bigger boost to its financials in the fourth quarter as AMZN is committed to spending billions on AI infrastructure this year.

While the related benefit to revenue may not have materialised to the extent that shareholders wanted, “the growth is clearly being led by AI/cloud” at MRVL, according to the Loop Capital analyst.

In his research note, Mobley recommended that investors use the sell-off to their advantage as artificial intelligence will remain a meaningful tailwind for the semiconductor stock moving forward.

The case for buying Marvell shares on the dip

Marvell’s stock price decline despite strong results and better-than-expected guidance may be a gift for investors as the Wilmington headquartered firm remains a key supplier of custom AI chips to Amazon.

“We still believe there’s a great deal of upside if Marvell retains [the Amazon] Trainium [AI chip contract] going forward,” said Blayne Curtis – a Jefferies analyst in a research note on Thursday.

Plus, the Nasdaq-listed firm is now trading at a more compelling risk-reward. Versus their year-to-date high, shares of Marvell Technology are down more than 40% at the time of writing.

Investors should also note that Marvell stock currently pays a dividend yield of 0.32% that makes up for another good reason to have it in your portfolio.

Marvell Q4 earnings highlights

Marvell earned 60 cents a share on $1.82 billion in revenue in its fourth financial quarter. Analysts, in comparison, were at 59 cents per share and $1.80 billion, respectively.

The chipmaker guided for $1.88 billion in revenue for Q1, which was also a tad above $1.87 billion that analysts had called.

In the earnings release, Matt Murphy, the company’s chief executive said:

Our custom AI silicon programmes have now entered volume production, and we continue to see strong growth from our interconnect products. We anticipate strong revenue growth for the full year.”

CEO Murphy’s remarks also suggest that he expects a bigger boost to revenue from the Amazon deal as we advance through the year. Despite today’s decline, Marvell stock is up more than 30% versus its 52-week low at writing.