Institutional Buying Put A Bottom In Marvell Technology
August 26, 2022 at 11:00 AM EDT
Institutional activity has been mixed for Marvell Technology (NASDAQ: MRVL) over the last year but there are two bullish takeaways from the data. The first is that net activity over the preceding 12 months was net-bullish in the amount of $2.54 billion which is worth about 5.4% of the market cap with shares trading at $55. That activity has the total institutional ownership up to 83% and growing which brings me to the next bullish takeaway. The institutional activity was mixed over the last 12 months but it picked up significantly in the first half of the 3rd quarter of 2022 in favor of the bulls. The net activity amounts to $1.335 billion in buying or 2.85% of the market cap and more than half the buying for the past year which is a strong signal from the sell-side community.
The analysts' activity is bullish as well although the uptrend in the consensus price target appears to have halted. The 30 analysts rating the stock have it pegged at a Moderate Buy and that rating has held firm over the past year. The price target is up 37% from last year and 50% above the price action at $55 but it has come down over the past month and it may fall a little more in the wake o the Q2 release.
The release was strong but highlights slowing growth and that could weigh on sell-side sentiment as well as the broader market. There’ve been only a few major analyst calls out since the report was released and they have been supportive but came with some small price target corrections. The two of note come from Morgan Stanley (NYSE: MS) and Deutsche Bank which both have targets below the consensus figure. Analysts from the banks view the report as strong but see near-term headwinds impacting results. The take from the commentary, however, is that Marvell is set up to experience some tailwinds that could begin blowing as soon as the 4th quarter of the year and that growth, while, slowing, is still compelling.
Marvell Technology Falls On Mixed Results
Marvell Technology had a strong quarter but shares are falling in the wake of the report because the 41.1% revenue growth and $0.57 in adjusted earnings were only as expected. The market was looking for some strength due to the focus on data centers which appear to be strong based on results from other chipmakers. NVIDIA (NASDAQ: NVDA), specifically, reported weakness in PC and gaming that could persist but offset that outlook with strong results and outlook on the data center end of the business.
The margins expanded considerably from last year but this was expected due to one-off items in the previous year but even the adjusted margin showed some improvement. The takeaway, however, is that adjusted earnings of $0.57 only beat by a penny which is a small margin of error for a market hoping for real strength and the guidance is weak. The outlook for the 3rd quarter is light in regard to both revenue and earnings and reinforces the idea of slowing growth at Marvell.
The Technical Outlook: Marvell Technology Is In Reversal
Marvell Technology had a mixed quarter and guided light and that may weigh on share prices near term. Marvell Technology also indicated long-term trends were intact and supply chain constraints were easing which has it set up to possibly reaccelerate growth and/or outperform in the 4th quarter or even sooner and that optimism can be seen in the chart. The Price action in Marvell began to bottom long before the Q2 results were released and even entered reversal ahead of the report. The price action on the day of the report (it was released after hours) had the stock up 5% and confirmed support near the $52 level. The price action is pulling back in the wake of the release but it is still showing support that is consistent with a Head & Shoulders Reversal Pattern.