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Marvel Technology Group Lts. (MRVL) Announces Major Restructuring: Analysts Weigh In

By Christine Brown

On September 24, Marvell Technology Group Ltd. (NASDAQ:MRVL), a semiconductor company, announced a major restructuring in its mobile platform business. The company plans to downsize its mobile platform organization and focus its technology towards opportunities in automotive, networking, and Internet of Things. Analysts Chris Caso and Sanjay Chaurasia weighed in.

On September 25th, Chris Caso from Susquehanna maintained a Neutral rating on the stock. He expressed disappointment over the fact that instead of selling the mobile platform business, Marvell decided to shut it down. However, he acknowledged the decision is a correct one. He said, “While the headcount reduction associated with this action is regrettable, we think the company’s decision is the correct one, since we didn’t see a path toward reversing the steep operating losses in that business.’’ He says investors may perceive the decision as a lost opportunity, given that the company could have secured a better outcome had they acted sooner.

Chris Caso has a 67% success rate recommending stocks with a +13.3% average return per rating when measured over a one-year horizon and no benchmark.

On the same day, Sanjay Chaurasia from Nomura maintained a Buy rating for the stock; however he reduced his price target for the stock to $14, from the earlier target of $16. According to Chaurasia, “Mobile restructuring removed a substantial drag. But due to lack of a clear growth strategy post-exit, we see Marvell as under pressure to pursue a path of inorganic growth or to consider additional alternatives.” Shedding some more light on the deal, Chaurasia said Marvel expects savings of $170-220m in operating expenses on an annualized basis. The restructuring should be complete by the end of FY16. As per Chaurasia’s expectations, within the networking segment, going forward Marvell will focus on strengthening its service provider switching and NPU business.

Sanjay Chaurasia has a 23% success rate recommending stocks with an average loss of 4.2% per rating.

According to TipRanks, 20 analysts have weighed in on Marvell in the last 3 months. Only 5 of the analysts are bullish on the company, 1 is bearish, and 14 are staying on the sidelines. The average 12-month price target between these 20 analysts is $11.60, marking a 26% potential upside from current levels.