Marvell Technology ($MRVL) has been making waves in the semiconductor space, particularly with its increasing focus on artificial intelligence (AI). Despite the challenges the company has faced in previous quarters, the latest earnings report signals a potential turning point, especially when it comes to custom AI chip demand. As investors continue to flock to AI-related stocks, Marvell stands out as a solid bet not just for its growth potential, but also for its relative value in a sector where valuations are typically stretched.
A Strong Foundation in AI
The bullish thesis on MRVL stock rests largely on its involvement in the AI space. Marvell is one of the leading designers of custom AI chips, an area that is critical for the growth of large technology firms such as Alphabet ($GOOGL) and Amazon ($AMZN) AWS. Marvell’s data-center revenue surged by 92% year-over-year in its latest earnings report, hitting $881 million, surpassing analysts’ expectations of $865 million.
Marvell’s AI chip shipments have also begun, and the company is expected to exceed its AI revenue targets of $1.5 billion in fiscal 2025 and $2.5 billion in fiscal 2026. These robust projections underscore the company’s increasing importance in the AI semiconductor market, a space where it competes directly with Broadcom ($AVGO). Marvell's positioning allows it to offer custom silicon solutions, which sets it apart from other industry players and gives it a strategic advantage.
Undervalued Compared to Peers
When evaluating MRVL stock, it’s important to consider the company’s relative valuation. According to analysts, Marvell is expected to generate $7.47 billion in revenue in fiscal 2026. Based on the company’s shares outstanding count of 866.2 million and a recent closing price of $66.20, Marvell’s forward price-to-sales (P/S) ratio stands at 7.67x.
While this multiple may seem high at first glance, it’s worth noting that the semiconductor sector’s average P/S ratio is 3.85x. However, Marvell’s 7.67x P/S is significantly lower than its trailing twelve-month (TTM) P/S multiple of 10.84x. What’s more, since July 2023, the market has shown a willingness to accept a sales multiple of 9.9x for MRVL stock. This historical precedent suggests that at its current forward P/S of 7.67x, Marvell is undervalued relative to its potential.
Additionally, compared to high-flying semiconductor stocks like Nvidia ($NVDA), which have much higher valuations due to their dominance in the AI sector, Marvell offers a compelling alternative for investors who are looking for exposure to the AI revolution at a more reasonable price point.
Strong Analyst Support and Price Target
Wall Street analysts are also bullish on MRVL stock. The stock currently holds a strong buy consensus rating, and analysts have set a price target of $93.71, which represents nearly 42% upside from its current levels. This significant potential for price appreciation further supports the case for Marvell as a solid investment in the semiconductor and AI space.
While Marvell has faced challenges in past quarters, the company's ability to exceed expectations in its most recent earnings report is an encouraging sign. The positive momentum, coupled with its position in the AI semiconductor industry, makes it a stock worth watching closely.
Conclusion: A Smart Play on AI with Relative Value
In a market where AI-related stocks are often valued at premium multiples, MRVL stock offers a unique combination of growth and relative value. The company’s strategic focus on custom AI chip solutions has already begun paying off, with robust revenue growth and strong demand from major tech players like Google and Amazon. At its current valuation, Marvell provides a more affordable entry point into the AI space, especially when compared to more expensive peers.
With strong analyst support, an attractive price target, and a forward P/S ratio that suggests undervaluation, MRVL stock represents a compelling opportunity for investors seeking exposure to the AI revolution without overpaying for growth. If the company continues to execute on its AI strategy and delivers on its revenue targets, it has the potential to deliver substantial returns in the years to come.
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