Marvell Technology, a leading data center supplier, is facing high expectations from investors this year. Its share prices have hit new heights, driven by anticipations of strong demand for artificial intelligence (AI) solutions that will boost its business. Despite this, KeyBanc analysts have reduced their overweight (buy) rating on the shares and lowered the price target from $95 to $90 due to potential product delays that may negatively impact the company’s growth in the current year.
Despite these challenges, Marvell remains optimistic about the adoption of AI as a key driver of growth in the near term. The company has made significant investments to prepare for this wave and has guided that data center revenue will increase in the low-single-digit range in fiscal Q1 over the previous quarter. However, Marvell may need to exceed this estimate to meet investors’ high expectations.
The stock’s forward price-to-earnings ratio is an expensive 50, which may be considered pricey by some investors. The Wall Street consensus estimate projects that Marvell’s earnings per share will reach $3.33 in the next two years. Given its high valuation, Marvell will have to outperform Wall Street’s expectations to generate significant returns for investors in the future.
John Mackey, former CEO of Whole Foods Market and an Amazon subsidiary, serves on The Motley Fool’s board of directors. Author John Ballard has positions in Nvidia, and The Motley Fool recommends both Amazon and Nvidia while also recommending Marvell Technology. The Motley Fool upholds a disclosure policy.
