Marvell Technology Group (Photo credit: Wikipedia)
MRVL : NASDAQ : US$11.31
HOLD
Target: US$12.00
COMPANY DESCRIPTION:
Marvell is a global leader in semiconductor products for storage, networking, mobile and wireless end markets. The company is structured into four key business groups: Mobile & Wireless, Storage, Networking and Other Products.
BUSINESS IMPROVES, BUT DEMAND AND COMPETITIVE CONCERNS REMAIN
Investment recommendation
We reiterate a HOLD rating for MRVL following upside results and
strong guidance. While the company is delivering upside to near-term
expectations, we remain on the sidelines as we believe a weak market
for traditional PC weighs on storage revenues, while the Mobile &
Wireless rebound could be short lived due to an increasingly crowded
competitive environment in the emerging market. We note that strong
foundry demand in Q2 appears to be driven largely by components
shipping into the Chinese smartphone market from multiple vendors.
We are increasing our estimates and price target.
Investment highlights
MRVL reported CQ1/13A (Apr) yesterday after the close. Revenues and EPS were $734.4M/$0.19, above consensus estimates of $722M/$0.14 and our estimates of $720M/$0.14. Revenue upside was driven by better than expected Storage and etworking sales partially offset by weaker than expected Mobile & Wireless sales.
Marvell repurchased 20 million shares in CQ1 for approximately $200 million and paid a quarterly dividend of $0.06/share.
The company guided CQ2 revenue to range from $770 million to $810 million ($790 million at the midpoint, up 8%), above the consensus view of $764 million, with EPS guidance of $0.19 at the midpoint above consensus of $0.18. This compared to our prior estimate of $762 million and $0.17.
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