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Marvell (MRVL) Stock Has Surged Since Earnings, Can This Trend Continue in 2017?

About a month has gone by since the last earnings report for Marvell Technologies (MRVL) and it has been a pretty good run for the company overall. Shares have easily outpaced the market, and the company is now up over 60% in 2016 too. 

Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

 

Marvell Technology Q3 Earnings and Revenues Beat

Marvell Technology Group Ltd. reported better-than-expected third-quarter fiscal 2017 (ended on Oct 29, 2016) results.

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The company reported adjusted earnings (including stock-based compensation but excluding amortization, acquisition, restructuring, legal related expenses and other one-time items) of $0.15 per share, which comfortably beat the Zacks Consensus Estimate of $0.05 per share. Also, reported earnings were far better than the year-ago loss of $0.01 per share.

Quarter Details

Marvell’s revenues fell 3% year over year to $654.4 million. The reported figure however surpassed the Zacks Consensus Estimate of $612 million. The company blamed softer-than-expected demand in the mobile handset business for the dismal revenue performance.

By end markets, storage revenues increased 21% year over year mainly due to better-than-expected demand from the HDD (Hard-Disk Drive) and SSD (Solid-State Drive) segment.

The networking business increased 20% year over year mainly on the back of strong demand in the enterprise networking business.

Revenues from the mobile and wireless segment decreased 11% sequentially and 50% year over year, primarily due to the exit of mobiles and some lower margin units. Also, mobile handset-related revenues during the quarter were $4 million, down from $9 million in the previous quarter.

Marvell’s adjusted gross profit came in at $368.8 million, up 19.9% on a year-over-year basis. Gross margin also increased from 45.6% to 56.4% on a year-over-year basis, primarily due to a favorable product mix and higher operational efficiency.

Adjusted operating expenses were down 9.8% year over year to $281.9 million. Marvell’s adjusted operating income came in at $86.9 million as against an operating loss of $4.9 million reported in the year-ago period. The results were positively impacted by lower operating expenses as a percentage of revenues (down 322 basis points year over year).

During the quarter, Marvell paid $30.7 million as dividend to its shareholders and repurchased $56.5 million share.

Marvell during the quarter also approved a $1 billion share repurchase program. The new authorization will replace the earlier $3.25 billion share purchase program. The company had roughly $150 million worth of shares available for repurchase under the program.

Outlook

Marvell expects fourth-quarter fiscal 2017 revenues be $565 million (+/- 2%). Management expects non-GAAP gross margin to be in a range of 57% to 58% in the current quarter while non-GAAP operating expenses are expected to be roughly $225 million to $235 million. The company expects non-GAAP earnings per share to be $0.17 per share to $0.21 per share.

How have estimates been moving since then?

Since the earnings release, investors have witnessed an upward trend for fresh estimates. There have been eight revisions higher for the current quarter compared to zero lower, while the full year consensus has skyrocketed over 83% due to these changing analyst expectations.

MARVELL TECH GP Price and Consensus

MARVELL TECH GP Price and Consensus | MARVELL TECH GP Quote

VGM Scores

At this time, Marvell Technologies' stock has a subpar Growth score of 'D', however, its momentum is doing a bit better with a 'C'. Still, the stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has a VGM score of 'F', so it is pretty weak from a fundamental look.

Outlook

While estimates have been trending upward for the stock, the magnitude of these revisions is where the real promise is going forward for MRVL. Thus, it should comes with little surprise that shares of Marvell have a Zacks Rank # 1 (strong buy) and we are expecting more strong performance from MRVL in the New Year.

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MARVELL TECH GP (MRVL): Free Stock Analysis Report
 
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