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     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3349 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
Marvell under fire as supply chain woes add another element to tech stock sell-off (MRVL) Updated: 04-Mar-21 14:20 ET The robust demand seen across the semiconductor industry has recently produced exceptionally strong quarterly reports from companies across the space. For instance, in late January, Marvell (MRVL) competitor Advanced Micro Devices (AMD) issued 4Q20 results that easily surpassed expectations and provided FY21 revenue guidance that crushed the consensus estimate. The issue, though, is that the strong growth currently experienced in several semiconductor end markets (cloud computing, automotive, PCs, gaming) is already factored in to the stock performance for most companies. To illustrate the point, since factories and plants began reopening late last spring, shares of MRVL have soared by ~60%, while AMD and Broadcom (AVGO) have gained roughly 50% and 70%, respectively. This scenario presented a difficult set-up ahead of MRVL's 4Q21 report last night, especially as investors have cooled on technology stocks as interest rate concerns flare up. To reignite the bullish momentum, MRVL needed an impressive quarterly performance that exceeded lofty expectations, while easing fears about the highly-publicized supply constraints facing semiconductor producers. Although the results reflect the healthy business climate, MRVL fell short on both accounts. In an environment in which the vast majority of semiconductor companies are blowing out expectations, MRVL's inline EPS of $0.29 is viewed as a disappointment. To be fair, the company doesn't have a track record of blowing out expectations, but the lack of upside is noticeable in the current climate. The good news is, demand for its chips remains brisk, particularly in the 5G and automotive end markets. To put the strength into perspective, revenue more than doubled in these verticals and account for over 25% of FY21 revenue. Looking ahead, MRVL is very optimistic about its prospects in its automotive business. During the quarter, the company secured multiple Ethernet design wins for model year 2021 vehicles. This momentum is expected to continue with CEO Matt Murphy predicting that FY22 will be a "breakout year" for the business. Investors, however, aren't sharing in the enthusiasm, instead focusing on MRVL's cautious guidance and concerning commentary regarding the ongoing supply constraints. The mid-point of its 1Q22 EPS guidance ($0.27) is merely inline with expectations, while the company provided a very wide-ranging revenue outlook of $760-$840 mln vs. the $786.3 mln forecast. It's not surprising that MRVL continues to be impacted by supply chain issues. The disruptions have been highlighted by many semiconductor suppliers, including AMD, AVGO, and NVIDIA (NVDA). What's troubling, though, is that MRVL anticipates the supply gap to persist at least through FY22, while noting that lead times have extended. The bottom line is that MRVL is facing a mixed picture and that the company is struggling to meet its growth potential due to ongoing supply chain issues. That is not an ideal situation in the current stock market landscape as technology and growth names come under increasing pressure. |