The News: Marvell Technology Group Ltd. (NASDAQ: MRVL), a leader in infrastructure semiconductor solutions, today reported financial results for the second quarter of fiscal year 2020. Revenue for the second quarter of fiscal 2020 was $657 million, which exceeded the midpoint of the Company’s guidance provided on May 30, 2019.
GAAP net loss for the second quarter of fiscal 2020 was $(57) million, or $(0.09) per diluted share. Non-GAAP net income for the second quarter of fiscal 2020 was $110 million, or $0.16 per diluted share. Cash flow from operations for the second quarter was $73 million.
Analyst Take: Marvell may not be as widely known in Semiconductors as companies like Intel, AMD or NVIDIA, but the company is steadily growing and its contributions in areas like 5G are important to note for technology investors, enthusiasts and enterprise IT leaders.
In fact, with annual returns of greater than 50% YTD, Marvell has outperformed all of the above plus Micron and Qualcomm, only to be outpaced by AMD’s ~70% growth YTD.
Solid Performance, Conservative Guidance
For this quarter, the company showed a solid revenue beating analyst estimates of $652.1 Million by coming in at over $656 Million. The company also beat earnings per share estimates of around $.13 as they came in at $.16.
While the current results did outpace expectations, the company did find itself about 1% off YoY for the second quarter, but perhaps saw the most push back about its future earnings and revenue expectations which are about 19% off from Q3 from a year ago. The conservative guidance was tied to issues with China which has already impacted Marvell’s numbers in that market about 25%. Cisco’s weakened demand for Marvell products is one of the most notable indirect examples of the impact of the tensions with China.
While investors tend to be unsettled by short term setbacks, I believe the company is positioned well strategically to bounce back. In its earnings call, the company seconded that notion with a longer term for fiscal ’21 that include estimated growth of 21%
Introduction to Marvell
For those less familiar, I believe it is important to take a step back and (re)introduce Marvell. Albeit a more than $15 Billion dollar market cap, the company isn’t a household name, but you can be certain that it supplies a number of those companies with components that contribute to innovation that consumers and enterprises benefit from every day.
Per the company:
“Marvell first revolutionized the digital storage industry by moving information at speeds never thought possible. Today, that same breakthrough innovation remains at the heart of the company’s storage, processing, networking, security and connectivity solutions. With leading intellectual property and deep system-level knowledge, Marvell’s semiconductor solutions continue to transform the enterprise, cloud, automotive, industrial and consumer markets.”
The companies two biggest segments are storage and networking where the company builds everything from ARM based server processors to SSD storage to Automotive technologies like automotive storage and wireless systems that enable infotainment. It’s a broad portfolio in key areas that are going to continue to see a boon with the growth of compute and connectivity (5G)
What to Watch For?
Marvell touts four main solution areas for its product portfolio.
Based upon technology proliferation, those are all very good segments to be in. However, I’m particularly bullish on companies contributing to 5G’s adoption as well as companies that are driving the future at the edge. Pun intended.
Meanwhile, Datacenter and Enterprise should be steady performers
Why Marvell is Well Positioned
As mentioned above, Marvell has a broad product portfolio in key solutions that has the company well positioned for the future. Trade uncertainties with China aren’t helping any semiconductor company or really any company that depends on compute or connectivity.
Marvell’s strategy isn’t driven by winning thousands of customers, but rather supplying critical components to a select number of the most influential enterprise, automotive and consumer tech companies on the planet. I do, however, expect more coverage of the company as its influence continues to grow with the expansion of 5G and other compute and connectivity needs.
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Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.