Marvell Technology Group Q2 Earnings: Beating Expectations

Mid cap fabless semiconductor stock Marvell Technology Group Ltd (NASDAQ: MRVL) reported Q2 fiscal 2018 earnings after the Thursday market close with results beating Wall Street expectations. Q2 revenue was $604.750 million (which exceeded the midpoint of the Company’s guidance provided on May 25, 2017) versus $597.346 million. GAAP net income from continuing operations was $165.259 million versus $51.305 million. The CEO commented:

“I am pleased to report that our second quarter results demonstrated Marvell’s continued transformation as a company, achieving revenue above the midpoint of our guidance, improved profitability and continued return of capital to shareholders. I’m proud of our team — in a competitive environment, we are delivering innovative solutions that our customers clearly value.”

Marvell Technology Groupwas in our Elite Opportunity Pro (EOP)portfolio back in 2013 becauseits fundamental and technical context appeared very attractive at the time and the Company’s productswere alsodriving Samsung’s family of mobile devices. Our SCN EO newsletter had noted back in May 2013:

The midcap tech play offers plenty to like from both a fundamental and technical perspective right now. The stock sports a very reasonable forward P/E of 12.09, has no debt, over a billion in cash on the books and even offers a dividend of just over 2% for its shareholders. From a technical perspective, the stock appears to offer some real upside if the Company can continue to deliver on both the top and bottom line, which they are set to report their quarterly numbers on May 23rd.

I’ve included a weekly chart here of MRVL. After making a double bottom late last year, the stock ran to a short-term high of just under $11 per share back in mid-March before falling victim to some profit taking. Since then, the stock traded to a low of just under $9.50 before finding its footing again and finding its way back to where it’s at now, which is just under that $11 mark again. What I like here is when the stock first traded to that $11 dollar level, it ran into a very logical resistance level. The stock then pulled back and gunned for that same level again earlier this month. However, it failed once again and started moving lower, only to be met with some surprising strength once again over the last few weeks.

Back inNovember, Marvell Technology Group announced restructuring actions intended to refocus its research and development (R&D), increase operational efficiency and improve profitability. These actions are expected to be fully implemented by the end of October 2017 to lower annual operating expenses from a current annualized run rate of $1.08 billion to the $820-840 million range andincur charges of $90-110 million over the next four quarters.

A technical chart for Marvell Technology Group shows shares having fallen below a key resistancelevel or line of support:

A long term performance chart shows Marvell Technology Group under performingpeersSTMicroelectronics NV (NYSE: STM) and ETF benchmarks SPDR S&P Semiconductor ETF (NYSEARCA: XSD) and iShares PHLX SOX Semiconductor Sector (NASDAQ: SOXX)will all taking offlast year:

Finally, here is a quick recap of small cap Marvell Technology Groups recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History10/30/20161/30/20174/29/20177/30/2017
EPS Est. 0.12 0.19 0.21 0.28
EPS Actual 0.2 0.22 0.24 0.3
Difference 0.08 0.03 0.03 0.02
Surprise % 66.70% 15.80% 14.30% 7.10%
EPS TrendCurrent Qtr. (Oct 2017)Next Qtr. (Jan 2018)Current Year (2018)Next Year (2019)
Current Estimate 0.31 0.27 1.1 1.23
7 Days Ago 0.31 0.28 1.1 1.23
30 Days Ago 0.31 0.28 1.1 1.23
60 Days Ago 0.31 0.28 1.11 1.24
90 Days Ago 0.29 0.27 1.01 1.15

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