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Why Marvell Technology (MRVL) Shares Are Trading Lower Today

StockStory - Fri Dec 1, 2023

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What Happened:

Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) fell 5.4% in the morning session after the company reported third quarter results and provided revenue guidance for the next quarter that missed Wall Street's expectations. The consumer and automobile/industrial segments underperformed and weighed down the company's overall outlook. Management called out " inventory corrections and macroeconomic-induced demand headwinds in many end markets." For the broader semiconductor universe, we've noticed softening trends in the consumer and automobile/industrial end markets this quarter. 

On the other hand, EPS outperformed Wall Street's estimates, driven by healthy demand for AI solutions in its data center segment. In fact, the company expects its data center revenue growth to accelerate from 20% to 30% next quarter. Overall, this was a mediocre quarter for Marvell Technology.

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What is the market telling us:

Marvell Technology's shares are very volatile and over the last year have had 20 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the stock gained 18.9% on the news that the company reported first quarter results that beat analysts' revenue and earnings per share (EPS) estimates. Inventory levels also improved. 

On the other hand, it was less good to see deterioration in gross and operating margin. Regardless, guidance for the next quarter was slightly ahead for both revenue and EPS. Additionally, management provided bullish comments on the rest of the year, stating that "we are expecting revenue growth to accelerate in the second half of this fiscal year, accompanied by gross and operating margin expansion" and arguing that AI is a tailwind for the company. Overall, it was a mixed quarter, but the outlook and accompanying commentary were bright spots.

Marvell Technology is up 46% since the beginning of the year, but at $52.47 per share it is still trading 20.4% below its 52-week high of $65.93 from July 2023. Investors who bought $1,000 worth of Marvell Technology's shares 5 years ago would now be looking at an investment worth $3,208.

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