Marvell Technology: EPS Turnaround Ahead, Q2 Report On Tap (NASDAQ:MRVL)

JHVEPhoto Valuations across the Information Technology sector have been volatile in the last handful of months. Its P/E multiple climbed above 30 earlier this year before pulling back to near 28 at the April market trough. The same pattern played out from the July peak to the August nadir. Today, I.T. trades at 29.4 times forward earnings estimates, about five turns above its 5-year average. Much of the valuation premium stems from optimism around the AI trade. Near record-high margins today support a lofty multiple, but investors are likely to demand cash flow and profits related to AI in the coming quarters (and not just from chipmakers and those designing semiconductors). One firm seen as benefiting from AI in the years ahead is Marvell Technology (NASDAQ:MRVL). I reiterate a hold rating on the stock. I increasingly like the valuation as a period of high earnings growth nears, but its recent bottom-line GAAP miss and a weak chart amid a bearish seasonal stretch are headwinds. This is certainly a stock to keep on your radar come Q4 and beyond, however. Since my last report, shares are unchanged, underperforming both the S&P 500 and Nasdaq Composite. I.T. Sector P/E Recovers Back Near 30x FactSetAccording to Bank of America Global Research, Marvell is a leading fabless supplier of high-performance standard and semi-custom products with a core strength in developing complex System-on-Chip architectures, and integrating analog, mixed-signal, and digital signal processing functionality. Marvell’s broad portfolio of IP spans computing, optics, networking, storage, and security and addresses the enterprise, cloud, telecom, auto, and industrial markets. Back in May, Marvell reported a somewhat weak set of quarterly numbers. Q1 GAAP EPS verified at -$0.25, missing the Wall Street consensus by three pennies. Operating EPS was about in line, but the $60 billion market cap company posted just $1.16 billion of quarterly revenue, down 12% from year-ago levels, a modest miss. Shares traded lower by 10.5% following the modestly soft report. Optimism remains regarding an increasing share of AI in its revenue outlook – AI could represent upwards of 40% of Marvell’s top line by FY 2026. A cloud hanging over the firm is weakness among its legacy ‘old tech’ segments, including enterprise networking. The focus in the upcoming quarter to be reported next week will be AI sales related to electro-optics and its custom compute chips. The sellside forecasts revenue of $1.25 billion, with adjusted EPS of $0.29. Be sure to look for both the gross margin look-back, forecast to be 62%, and guidance from its management team. As it stands, the options market prices in an 8.9% earnings-related stock price swing when analyzing the at-the-money straddle, expiring soonest after the August 29th report. That’s a slightly more expensive straddle than the three-year history, according to data from Option Research & Technology Services (ORATS). MRVL Options Overview ORATSKey risks for the company and investment include its management effectively integrating new assets from previous acquisitions, proper management of the company’s net debt position (cash is currently $848 million), macroeconomic risks (particularly surrounding its legacy units which tend to be more cyclical), and higher competitive pressures. On the earnings outlook, analysts at BofA see operating EPS falling about 10% this year, with an earnings rebound in 2026. By 2027, non-GAAP per-share profits are forecast to approach $3. The current Seeking Alpha consensus figures show a similar EPS trajectory, but street numbers appear more sanguine compared to BofA’s take. Dividends, meanwhile, are projected to hold at just $0.24 per share, resulting in a modest yield. With an EV/EBITDA ratio that is significantly above that of the broader market, there’s clearly optimism priced into Marvell today, and free cash flow remains modest. Marvell: Earnings, Valuation, Free Cash Flow Forecasts BofA Global ResearchOn valuation, earlier this year, I had a $75 intrinsic value target. Today, with the earnings outlook not much changed, but also with higher profitability closer into view, the valuation demands a revisit. If we assume $2.41 of FY 2026 operating EPS and apply a 33x multiple, then shares should trade near $79.50. That’s up from a $75 target I put on the stock in Q2. If the sanguine EPS outlook verifies, then come this time next year, a 35x multiple on $2.60 of forward EPS would result in an even higher fair value, closer to $91, but we aren’t there yet. The upshot – I like the valuation more so today than in May, but the future remains cloudy. MRVL: Mixed Valuation Metrics, High EV/EBITDA Seeking AlphaCompared to its peers, MRVL features a poor valuation rating, but that’s common for many companies in the industry. I also took a look at how Goldman (GS) classifies Marvell – it sees the semiconductors industry company as an “AI Enabler,” and you can see in the chart below, that AI Enablers have generally struggled since early February – we have yet to see the price-action transition from infrastructure plays to the enablers. But Marvell’s growth forecast and current profitability trends are healthy, though the sellside has been soft on the firm. Finally, share-price momentum trends are decent, but I will highlight later in the article that the technical situation is not all that impressive right now, further underscoring a hold rating in my view. Competitor Analysis Seeking AlphaAI Enablers Continue To Struggle Goldman SachsLooking ahead, corporate event data provided by Wall Street Horizon show a confirmed Q2 2025 earnings date of Thursday, August 29 AMC with a conference call immediately after the numbers cross the wires. You can listen live here. Corporate Event Risk Calendar Wall Street HorizonThe Technical Take With shares modestly undervalued, MRVL’s price chart lacks a consistent uptrend. Notice in the graph below that shares had been on the rise in a solid way, from a low under $34 in early 2023 to a high north of $85 this past March. But the stock has taken a clear breather in the past five months (and is essentially flat since its June 2023 peak), falling to just above $53 at the August low and breaking below its rising long-term 200-day moving average. While MRVL is back above that trend-indicator line, the RSI momentum oscillator at the top of the chart remains in a downtrend. I also see potential selling pressure with the stock approaching the level at which it broke down in July. Moreover, there’s a high amount of volume by price up to about $70, which could make the ongoing battle between the bulls and bears even more protracted. I also reviewed MRVL’s seasonal history for a further read on price trends. The August through September stretch has produced very weak returns in the past 10 years, so now is a particularly precarious period of the year. MRVL: Neutral Chart YTD, Long-Term Support in the Upper $40s StockCharts.comMRVL: Bearish Seasonal Trends August-October Seeking AlphaThe Bottom Line I reiterate a hold rating on Marvell. The valuation is intriguing and could even become a GARP bargain in the quarter ahead, but the earnings outlook remains questionable while technicals are unimpressive heading into the Q2 report.

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