Investors have high expectations for this leading data center supplier.
stock price marvel technology (MRVL 1.56%) The company's stock has soared to new highs this year as investors anticipate strong artificial intelligence (AI) demand to boost the company's data center solutions business.
Early this week, key bank Analysts maintained an overweight (buy) rating on the stock, but lowered their price target to $90 from $95, noting that product delays could hurt the company's growth this year. The new price target for the next 12 months or so still represents nearly 24% upside compared to the current share price.
Is Marvel stock a buy?
Marvell reported improved growth last quarter due to strong demand for AI in data centers. While total revenue increased by only 1% year-on-year, revenue from the data center business increased by a whopping 54% year-on-year.
However, KeyBanc noted that there may be some delays in Marvel launching its next product. Amazon Web services (AWS) for which Marvell is a primary supplier.Marvell is also a supplier of AI chip readers Nvidiais releasing a new server rack system, but the downside for Marvell is that Nvidia's GB200 racks don't require optical connectors.
Still, Marvell sees the adoption of AI as a key driver of near-term growth. The company has been investing over the past few years to prepare for the AI wave. Management's guidance calls for fiscal first-quarter data center revenue to grow in the low single-digit range sequentially, but to meet investors' high expectations, You may need to exceed those expectations.
The company's stock trades at a hefty 50 times forward price-to-earnings ratio, leading analysts to lower their price targets to account for potential product delays. Wall Street consensus forecasts call for the company to earn $3.33 per share over the next two years.
Given the high price of the stock, Marvel will need to outperform Wall Street's expectations to make a big profit from this.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. John Ballard has a position at Nvidia. The Motley Fool has positions in Amazon and Nvidia and recommends Amazon and Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.
