Marvell Technology stock is firing on all cylinders: beware of key risks

Marvell Technology stock price remains in a strong bull run this year and is now hovering near its all-time high.

MRVL jumped to $308 on Monday, up by 233% this year and 350% in the last 12 months, making it one of the top gainers in Wall Street. Will this rally continue this year as potential risks rise?

Marvell Technology stock soared after Nvidia boost

The MRVL share price has jumped in the past few months, helped by a combination of the ongoing AI boom and Jensen Huang.

The AI boom has led to a surge in demand for its products, while Huang has made a $2 billion investment in the company. He then boosted the stock by noting that it would become a trillion-dollar firm over time.

Marvell Technology’s business has done well, helped by its large deals by companies like Amazon, Microsoft, Google, and Meta Platforms. Its top ten customers account for about 80% of its total revenue.

These companies have continued to rely on Marvell Technology for their custom chips. This demand has led to a strong revenue growth over time, a trend that may continue in the foreseeable future. Its annual revenue has jumped from over $4.46 billion in 2022 to over $8.1 billion last year. 

Wall Street analysts believe that the growth will continue growing. They expect the revenue to jump to $11.5 billion this year, followed by $16.6 billion next year. This will imply a 40% and 44% annual growth rate in the two years, and this trend will continue over time. 

Marvell’s growth has also been fueled by strategic acquisitions, including its recent buyout of Celestial AI in a $3.25 billion deal. It also acquired Polariton, an upcoming player in the optical scaling business.

The most recent numbers showed that Marvell Technology’s revenue rose by 28% this year, with its data center segment soaring to $1.83 billion. Its communications business made over $585 million. 

The management believes that AI has room to drive its growth through FY28. It expects that the FY27 YoY growth will be over 40%, with its data center segment growing by 50%.

Valuation concerns have remained

Still, the Marvell Technology stock faces some crucial risks. For example, analysts believe that the stock has deviated from its real value.

Several analysts remain bullish on the company but have price targets below the current share price, suggesting they believe the recent rally has moved ahead of fundamentals.

For example, Rosenblatt’s Kevin Cassidy reiterated his bullish outlook and maintained a target of $240. Oppenheimer’s Rick Schafer’s target is $250, while TD Cowen, Cantor Fitzgerald, KeyCorp, and Needham have a target of below $300. 

The other risk is that the company has become highly overvalued, with its forward P/E ratio of 70.

In contrast, companies like Micron and Nvidia have a multiple of less than 25. 

MRVL stock price technical analysis

Marvell Technology stock | Source: TradingView

The daily chart shows that MRVL has surged in the past few months. It formed a large gap on June 1 after the bullish outlook from Huang. As such, there is a risk that the stock will attempt to fill the gap over time.

The stock has also remained much higher than the 50-day and 100-day Exponential Moving Averages (EMA). It trades at $308, while the two moving averages are at $198 and $160. 

Therefore, there is a risk that it will go through a mean reversion, a situation where an asset moves back to its historical averages. If this happens, the stock may retreat to $200 over time.

In the near term, however, the risk-on sentiment suggests that the shares will continue rising, potentially to $350.