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Marvell's Q3 Boosted By Strength In Core Business

Marvell MRVL Boosted By Strength In Core Business

Marvell Technology Group Ltd. MRVL 8.42% reported robust Q3 results, while issuing strong guidance, driven by the strength in storage and meaningful improvement in gross margins.

Barclays’ Blayne Curtis maintained an Equal-Weight rating on the company, while raising the price target from $12 to $14.

Restructuring & Buyback Plans

“Storage saw growth from both HDD and SSD and Networking was better than expectations,” Curtis mentioned.

The restructuring plan announced in early November has also been progressing ahead of schedule and is likely to have an impact on the Q4 performance, with the company guiding to gross margins of 58-60 percent by H2FY18.

Marvell has also announced a share buyback program worth $1 billion, and expects to complete $500 million of the buyback authorization over the next 12 months, “signaling a return to the strong capital return commitment the company showed prior to the CMU case,” the analyst stated.

Core Business Drove CQ3

Despite the outperformance during the quarter, Curtis prefers to remain on the sideline until there is greater clarity regarding the drivers of top line growth for the company, “once the current restructuring efforts have played out.”

Marvell reported its Q3 revenue at $654 million, well ahead of the consensus, driven by the strength in its core business.

While the Networking segment saw a decline, it performed better than expected, growing 20 percent year-on-year.

The Storage segment grew 19 percent quarter-on-quarter, driven by HDD growth, which in turn was due to demand and inventory replenishments. SSD also grew, driven by robust SATA and PCIe demand.

Gross margins were well above expectations, driven by operation efficiency and a better mix. The non-GAAP EPS came in at $0.20, ahead of the consensus.

DateFirmActionFromTo
Nov 2016SusquehannaUpgradesNeutralPositive
Oct 2016Credit SuisseUpgradesNeutralOutperform
Sep 2016SusquehannaInitiates Coverage onNeutral

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