Marvell Technology stock peaked at $252 last week after announcing a major $12 billion deal with Google. It then pulled back to $230 as investors sold the news and waited for the upcoming earnings report, which will provide more information about its business. So, is MRVL a good buy or sell ahead of earnings?
Marvell Technology stock in the spotlight ahead of earnings
Marvell Technology is a top company in the semiconductor industry, where it offers key products in the artificial intelligence sector. It has become a major partner to large hyperscalers like Microsoft, Amazon, and Google, which are now building their own chips.
In a statement last week, the company announced that it had reached a $12 billion deal with Google, extending a partnership that has been going on for years. This deal will see it make more of Google’s TPU chips, which it plans to make available to other companies.
Other hyperscalers are also boosting the production of these chips, which are now seen as good alternatives to Nvidia chips. This is important now that Nvidia is planning to hike prices of its top products by as much as 15%.
The next important catalyst for the MRVL stock price will be its earnings report scheduled for Thursday this week. Based on the recent earnings by hyperscalers and suppliers, there is a chance that its revenue growth will continue.
The average estimate is that its revenue grew by 35% in the quarter to $2.7 billion. Notably, its growth will continue in the coming years as it starts ramping up deliveries to top clients. This revenue growth will also be because of its Celestial AI acquisition, which gave it more access to the data center industry.
In this case, its annual revenue growth this year will be 41% to $11.55 billion, followed by 45% to $16.8 billion. This growth may help to justify its valuation metrics, which have become stretched this year. The forward price-to-earnings ratio has moved to 58, much higher than other companies like Nvidia, Micron, and SanDisk.
In addition to the valuation risk, the company faces the AI bubble risk, which Michael Burry has warned is a possibility.
On the positive side, analysts have a bullish outlook for the MRVL stock. For example, RBC Capital Market has a target of $360, while Roth Capital targets $350. Other bullish companies are Jefferies, Oppenheimer, Barclays, and UBS.
MRVL stock price technical analysis
Marvell stock chart | Source: TradingView
The weekly chart shows that the MRVL stock peaked at $330 and then tumbled as concerns about the AI trade intensified. It dropped to $162 in July and then bounced back to the current $237.
The stock remains above the 38.2% Fibonacci Retracement level and the 50-week Exponential Moving Average (EMA). The risk, however, is that it has formed an evening star candle, which may lead to a steeper reversal. If this happens, the stock may drop to the psychological level of $200.
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