Marvell Technology (NASDAQ:MRVL) stock has rebounded over the past three weeks, climbing from a July low of $162.90 to a high of $252. The rally continued this week after the company struck a $12 billion deal with Alphabet (NASDAQ:GOOG). Attention now turns to Marvell’s upcoming earnings report, which will be key to justifying its elevated valuation.
Marvell Technology to Publish Strong Earnings Report
MRVL stock will be in the spotlight as it releases its earnings report on Thursday, which will provide more information about its revenue and profitability growth.
Benzinga data shows that the average estimate is that its revenue will come in at $2.71 billion, up by 35% YoY. This growth is expected to accelerate after its Celestial AI acquisition that closed in February. Celestial gave it access to the popular Photonic Fabric optical interconnect technology that is being used in data centers globally.
The earnings-per-share is expected to come in at 93 cents, up sharply from the 67 cents it made last year. Most traders on Polymarket predict that the company’s earnings will be better than what analysts expect.
These numbers come a week after the company reached a $12 billion deal with Google. This deal extends its long-running partnership in which it manufactures Google’s TPU chips that are seeing strong demand.
Marvell also counts other top hyperscalers like Microsoft (NASDAQ:MRVL), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN). It builds Amazon’s Tranium, Microsoft’s Maia, and Meta’s MAIA chips.
Valuation Concerns are Hitting Marvell Shares
Analysts are highly bullish on Marvell, with Nvidia’s Jensen Huang predicting that it will ultimately hit a $1 trillion valuation. Citigroup’s Atif Malik hiked his target from $225 to $275, while Oppenheimer’s Rick Schafer boosted it from $250 to $300.
Still, there are signs that the company is highly overvalued. Its forward price-to-earnings ratio has jumped to 58, much higher than the five-year average of 37. It is also much higher than other companies like Nvidia (NASDAQ:NVDA) and Micron (NASDAQ:MU), which are growing at a faster pace. On the positive side, its Rule-of-40 multiple of 70% means that it is balancing its growth and margins.
Based on the recent earnings reports by companies like AMD and Lam Research, a beat and a raise will not be enough to boost its stock. The company will need to deliver a bigger beat than expected and potentially boost its share buyback.
The stock is expected to be highly volatile after its earnings report, with its implied volatility rising to 110%. It has a put/call open interest ratio of 0.54, a sign that it has more puts than calls, which is a bullish sign.
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