To The Moon

$Marvell Technology(MRVL)$   reported better-than-expected Q1 2025 earnings, with adjusted EPS of $0.62 (vs. $0.61 estimates) and revenue of $1.90 billion (vs. $1.88B estimates). Despite this beat, shares fell 1.33% to $63.73 as of May 30, 2025, extending a 44.77% decline over the past three months. Below, we unpack the market’s reaction and why investors should maintain perspective.

Key Positives from the Earnings Report

AI & Data Center Strength :

Data center revenue surged 87% YoY , driven by demand for electro-optics and custom AI compute solutions.

Marvell is shipping next-gen 1.6T solutions for AI deployments and sees strong interest in 800-gig products.

Margin Improvement:

Non-GAAP gross margin improved to 59.8% , up from 42.16% in Q1 2024.

Operating cash flow to current liabilities ratio rose to 0.88 (vs. 0.27 in Q1 2024).

Analyst Confidence:

22 analysts rate MRVL a Buy, with a mean price target of $96.03 (51% upside from current levels).

Forward P/E of 23.1x is below the historical average of 36.8x , suggesting undervaluation.

Why Did the Stock Drop?

Mixed Guidance:

While Q2 revenue guidance of $2.00B aligned with estimates, investors hoped for stronger upside given the AI momentum.

Management noted softness in enterprise networking, carrier markets, and automotive sectors.

GAAP Losses:

GAAP EPS was -$0.25 , reflecting ongoing restructuring costs and R&D investments.

Sentiment Overhang:

Short-term traders likely focused on bearish options activity, including large put orders at $110 and $130 strikes expiring June 2025.

Short interest remains elevated at 9.71% of volume (as of May 28), reflecting skepticism.

Long-Term Bullish Catalysts

AI Leadership:

Marvell’s custom AI chips and 800-gig products position it to capture a $1 billion+ market in AI-driven data centers.

Financial Forecasts:

Analysts project 2027FY EPS of $3.56 (vs. -$1.02 TTM) and gross income growth to $11.38B by 2028FY (up from $8.21B in 2026FY).

Valuation Support:

The stock trades at 4.1x P/B and 9.55x P/S , below peers in the semiconductor sector.

Resistance at $71.68 (May 28) suggests room for recovery if momentum shifts.

Investor Takeaway

While near-term headwinds in non-AI segments and profit-taking explain the post-earnings dip, Marvell’s strategic focus on AI infrastructure and improving margins justify a long-term bullish outlook. The stock’s current price presents a potential entry point, with analysts forecasting ~50% upside to fair value.

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