It has been about a month since the last earnings report for Marvell Technology (MRVL). Shares have added about 6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marvell due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Marvell Technology delivered second-quarter fiscal 2021 non-GAAP earnings of 21 cents, which surpassed the Zacks Consensus Estimate of 10 cents. Moreover, the reported figure increased three-fold from the year-ago quarter’s earnings of 7 cents.
Marvell’s revenues of $727 million also outpaced the consensus mark of $720.5 million. In addition, the revenue figure increased 10.7% year over year. Strong demand for its networking products from the data-center and 5G infrastructure end markets aided the company’s performance during the reported quarter.
In the end markets, storage revenues (40% of total revenues) grew 6% year over year to $290 million. This upswing is mainly attributable to the ramp-up of a customized SSD controller for DIY program and easing of the pandemic-related production challenges. The company noted that the supply-chain improvement benefited its fiber channel and storage controller products. Additionally, Marvell’s SSD business continues to grow.
The networking business (56%) revenues rose 23% year over year to $406 million on the ongoing 5G deployments in China.
Other product revenues (4%) during the fiscal second quarter decreased 41% on a year-over-year basis to $30.8 million.
Marvell’s non-GAAP gross margin came in at 63.3%. Non-GAAP operating expenses were $297 million. Non-GAAP operating margin expanded 170 basis points year over year to 22.4%.
Marvell exited the reported quarter with cash and cash equivalents of $831.5 million compared with the previous quarter’s $667.5 million. The company’s long-term debt totaled $992.4 million.
The company generated cash from operating activities of $225.8 million during the fiscal second quarter and $401.5 million in the first half of fiscal 2021. During the quarter, Marvell returned $40.1 million to shareholders through dividend payments. In the first half of the fiscal year, it repurchased shares worth $25.2 million and paid $79.9 million in dividend.
Marvell's guidance for the third quarter of fiscal 2021 takes into account the U.S. government's export restriction on certain Chinese customers. The company has temporarily widened the guided range for revenues due to the uncertainties associated with the coronavirus crisis.
The company projects third-quarter fiscal 2021 revenues of $750 million (up or down up to 5%). The Zacks Consensus Estimate for revenues is pegged at $774.2 million, suggesting growth of 16.9% from the year-ago quarter.
Non-GAAP earnings per share are expected between 22 cents and 28 cents. The consensus mark of 16 cents indicates a 123.2% year-over-year slump.
The company projects Networking revenues to increase in the mid-to-high single-digit range in the ongoing quarter mainly driven by significant growth in wireless infrastructure, and the data-center end markets. However, demand in enterprise market is expected to remain soft during the current quarter due to the COVID-19 pandemic.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Marvell has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Marvell has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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