In a world where investors are used to seeing AI firms report exciting growth in data centre revenue – Marvell Technology Inc (NASDAQ: MRVL) came in shy of expectations on that front in Q2.
Naturally, investors bailed on MRVL shares today, making it close down nearly 20%.
Still, a senior JPMorgan analyst argues the post-earnings decline in Marvell stock is “overdone”, and is actually a buying opportunity for long-term investors.
The semiconductor stock has been a lucrative investment in recent months. Despite today’s crash, it’s up more than 25% versus its year-to-date low in the first week of April.
AI remains a long-term tailwind for Marvell stock
Investors punished MRVL stock on August 29th also because the firm’s executives issued guidance that did not meet expectations either.
Marvell now sees its revenue coming in at $2.06 billion in the current quarter, slightly below $2.11 billion that analysts had forecast. However, none of it matters much for Harlan Sur.
In a post-earnings research note, the JPM analyst said he’s looking beyond near-term volatility as the longer-term bullish narrative surrounding Marvell shares remains intact.
“Overall, we see a solid setup for the company – driven by the continued recovery in its cyclical businesses and sustained AI growth tailwinds.”
Note that the chip stock also currently pays a small dividend yield of 0.38%, which makes it even more attractive to own for the long term.
MRVL shares are not expensive to own per se
According to the JPMorgan analyst, investors are discounting a robust 58% year-on-year increase in Marvell’s overall revenue to a record $2.01 billion, even with some softness in the data centre unit.
Long-term investors should load up on Marvell shares with some confidence since the company’s custom ASIC partnerships with cash-rich customers like Amazon and Google will eventually send them higher.
Additionally, Harlan Sur also sees next-gen chips like SmartNIC/DPU and eSSD controller ASICs contributing more meaningfully to MRVL’s topline next year. In the near-term, a September rate cut could help this AI stock as well, he concluded.
What’s also worth mentioning is that Marvell stock can now be notched at an attractive valuation.
Its price-to-sales (P/S) multiple currently sits a tad above 11, only – materially below several other AI stocks, including Nvidia, that is going for about 34 at the time of writing.
Should you buy Marvell shares on the post-earnings plunge?
In conclusion, MRVL shares remain worth buying on post-earnings weakness as the chipmaker’s long-term AI narrative remains intact, buoyed by custom chips deals, next-gen product momentum and a compelling valuation.
With cyclical recovery underway and potential macro tailwinds, MRVL may offer patient investors a rare entry point into a high-growth semiconductor story.
That’s why the consensus rating on Marvell stock also currently sits at “buy” with the mean target of about $87, indicating potential upside of 45% from here.
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