Why is Merrill so Negative about Marvel?

On Monday, Merrill Lynch (MER) published a research report on Marvell Technology Group (Nasdaq: MRVL) as part of a “What the heck do investors do in 2008″ piece.

In a relatively bold move, Merrill gets contrarian on this call as sentiment on Marvell has soured since the company reported earnings last week. Merrill thinks that 2008 is a pivotal year and investors need to tread carefully as they choose which subsector of technology to plow their money into.

The bank recommends buying Marvell with a $20 price target based on “solid topline growth, gross margin expansion, and better opex discipline.”

We recently wrote about cost cutting measures the company was taking in the wake of disappointing, though not disastrous, earnings.

Israel Opportunity Investor editor, Aaron Katsman, believes that this may be a good time for an entry into the stock as well. Recently he wrote,

Keep in mind the relationship with Apple (AAPL). Marvell is currently supplying the WiFi chip in the iPhone, and many analysts are predicting that it will grow the Apple relationship, especially for the next-generation video iPod player.

It’s definitely a stock with hair on it. But after taking a recent haircut, it may be an interesting, albeit drawn-out, play.

Disclosure: The author’s fund has a position in MRVL, but he holds no position in any other stock mentioned, as of December 4, 2007.

Comments

[SDBryan]

Just an FYI...

"Marvel" (in your title) = MVL = Marvel Entertainment, Inc.
"Marvell" (in your article) = MRVL = Marvell Technology Group Ltd