Wednesday, November 28, 2007

Marvell (NASDAQ:MRVL): Bounce?

Several firms comment on Marvell (NASDAQ:MRVL) after the co reported its quarterly results and guidance last night:

- Banc of America is the most pessimistic of the analyst community noting that in part to resolve this expense creep (+4.4% Q/Q) and in part to rationalize the headcount in the acquired Intel group, MRVL announced a 7% RIF (400 heads), to start in Q4. With annualized savings of $40m per year, they think both scope and the dollar impact of the RIF for next year were less than had been hoped.

Further, guidance for a return to only 50% GMs in the 2H08, while consistent with firm's thesis, is likely to disappoint, as they think some investors were looking for 50%+ GMs in the 2H based on cost savings from a transition to manufacturing of cellular products at TSM. Firm's new tgt is $15, based on a PE multiple of 22x F2009 pro forma EPS estimate of $0.67, net of cash. Maintains Neutral.

- Jefferies notes that although the cellular business is still negatively impacting profitability, they believe Marvell is well positioned to regain profitability and revenue growth in CY08 as it benefits from multiple product cycles and drives operational leverage within its acquired assets (PXA, Avago, QLogic). Firm believes the stock may be weak today as some may view the guidance as weak given the extra week; yet at the end of day, they believe MRVL is attractively valued at ~15x '09 EPS. Maintains Buy and $21 tgt.

- Goldman Sachs lowers their tgt to $19 from $21 but retains a Buy rating asthey are encouraged by MRVL's growth prospects and increased margin focus, but recognize investors have been shaken by recent missteps and could wait for a new permanent CFO.

- Citigroup thinks the quarter was solid and a 400-person lay-off plus an array of gross margin initiatives show a new sense of urgency regarding current investor concerns. While they expected revenue growth guidance conservatism, the Street found this and C2008's margin outlook unsatisfactory, pressuring the stock to $15.15 AMC. In firm's view, the Street cuts they feared are an opportunity to Buy, not sell the stock, and they would use weakness to leg into positions.

- Oppenheimer says MRVL reported strong Q308(Oct) revenues/EPS beating street consensus estimates handily. Guidance for Q4 also beat consensus on all fronts. Stock was down in after hours as the bears are pushing that the upside guidance is based on a 14week versus a normal 13week quarter. Nevertheless, the firm believes fundamentally MRVL is showing improvements on all fronts. Buyers on the pullback as they see business improving ahead of plan. Maintains Buy and $22 tgt.

Notablecalls: With MRVL stock trading around $15 in after hours (down 10%), I would look to buy some for a bounce.

1 comment:

dcxavier said...

I like to use a three day rule when a stock dives on bad news like this. Wait three days, then buy if you want. It seems like if the bounce doesn't happen on the open, it's not going to at all. It often takes three days for the selling to complete itself.

I got lucky on MRVL, sold my position late yesterday afternoon prior to the close and earnings release.