That has triggered some hand-wringing from drive investors - as Tiernan noted last night, drive stocks fell in after-hours trading on the Marvell news - and it has chip investors wondering who else might be vulnerable to similar problems. The reaction from analysts have been mixed on Marvell; more than few continue to recommend the shares. Here’s a rundown on the commentary on Marvell:
- Alex Gauna, UBS: While end market and semi industry slowing is widely evident as macro economic conditions cool, MRVL downward guidance is far more severe than our checks would indicate. this suggests to us near-term shipping restraint by MRVL will clear channel inventory and set up/amplify a solid [calendar 2007] recovery. Maintains Buy rating; $30 price target. Fiscal 2008 sales forecast to $2.75 billion from $3.1 billion, with EPS now 57 cents, down from 77 cents.
- Cody Acree, Stifel Nicolaus: Investors looking into 2007 should use this pullback as an opportunity to build true investment position, all else being equal…With MRVL’s shares continuing to trade at about half the firm’s historical average P/E multiple and at at discount to the peer group, we maintain our Buy rating, but are lowering our target price to $25 from $27.
- Adam Benjamin, Jefferies: Although the lower guidance is disappointing, we believe this setback will be short-lived and Marvell is well-positioned to deliver strong profitability and revenue growth in the long-term as it benefits from multiple product cycles across its broad-based product portfolio.Maintains Buy rating; price target dropped to $21 from $25.
- Chris Caso, Friedman Billings Ramsey: The main culprit appears to be inventory, particularly in the hard drive space, due to the PC slowdown that started in [the first half], and exacerbated by the [Seagate/Maxtor] merger. Net, not a big surprise, although it is notable that the company chose to throw in the towel with still a month to go in the quarter. Maintain Market Perform and reduced price target to $19 from $23.
- Srini Pajjuri, Merrill Lynch: Big Miss!...Given the excess inventory at Western Digital (WDC) and Seagate (STX) at the end of Q2, we are not totally surprised by the miss. However, the magnitude of the shortfall suggests that the seasonal pickup is also slower than expected. Price pressures do not appear to be impacting MRVL as yet, but could become an issue if the HDD market doesn’t rebound quickly…We continue to place the stock under review given its lack of adequate financials and option grant related risks.
- Louis Gerhardy, Morgan Stanley: We continue to believe MRVL will trade in a volatile sideways pattern for 2-3 months until a) the impact of the semiconductor cycle is more completely understood b) investors incorporate the dilution from the Intel acquisition [and] c) investors understand why the Intel acquisition is a solid strategic move…We are bullish on MRVL over the long-run…Maintain Overweight Rating. Price target to $33, from $34.
- Allan Mishan, CIBC: We view this miss as a game changing event…With storage share gains now in the past, Marvell’s growth must come from new areas. The company must re-enter investment mode, though this time it has solid cash flow to draw on from its prior successes…We remain bullish longer-term. Rating: Sector Outperformer. Price target: $23, down from $24.
MRVL 1-yr chart: