On June 5, with Marvell (MRVL) closing that day at $12.03, I published my article "Disagreeing On Marvell's Prospects" where I stated my reasons for being negative on Marvell. The stock had its ups and downs since then and now sits at $11.31 while I write this. The move wasn't tremendous, but the stock has clearly underperformed as predicted.
I'm now writing this to say I'm going neutral on the stock. I'm going neutral on what might just be a sideshow, but the risk of being negative is clearly increasing due to this sideshow.
On July 24 Google (GOOG) announced Google Chromecast. The Chromecast is a HDMI dongle that plugs into a TV and allows for streaming content via Wifi, which then allows connecting to local computers or a stream from the internet via those local computers.
According to an iFixit teardown, the Chromecast is powered by a Marvell DE3005-A1 SoC (also known as ARMADA 1500-mini).
While this should be a low cost component, there are two angles here which make me go neutral:
- First, Chromecast is selling extremely well. It has led Amazon.com's (AMZN) best sellers' list consistently for weeks now. This means that overall it must be selling many millions of units. Over a single quarter this can actually impact Marvell's $870 million estimated quarterly revenue. For instance, 10 million units at $5 would add $50 million in revenues, enough to register.
- Second, Chromecast can easily lead to Marvell being treated as a story stock. In the present market that can mean significantly higher stock prices regardless of fundamentals. It makes little sense for me to stay negative in the stock with this possibility ahead of it.
What this means is that while Chromecast alone is not enough to dictate Marvell's fortunes, it might be enough to build a story around the stock. It might also be enough to temporarily allow Marvell to meet or exceed its expectations in spite of the BlackBerry (BBRY) implosion.
In short, tactically I think it's a good time for a bear to leave the battlefield in Marvell.
As expected, Marvell was an underperformer over the last few months. However, new developments regarding Google Chromecast seem to make it hard to remain bearish on the stock. I'm going neutral here, since Chromecast might be enough to move the revenue needle and might also lend Marvell something of a story for speculators to latch on to.