Blue Skies Ahead for Marvell (MRVL)

| About: Marvell Technology (MRVL)
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On Thursday, Marvell Technology Group (NASDAQ:MRVL) reported a great first quarter with sales of $521.2m and earnings per share of $0.44 - $0.02 above Wall Street analysts’ expectations. The announcement came right at a lull in the market weakness over the past week and investors, itching to buy some now-cheap stocks, sent the stock soaring 13% over the closing price the night before.

Why so much excitement? Well, a big reason that these results were so exciting to investors is because they clearly set apart Marvell from struggling PC-focused companies like Dell Inc. (DELL), Intel Corp. (NASDAQ:INTC) and Advanced Micro Devices Inc. (NASDAQ:AMD). Though Marvell does make chips that go into PCs, they really are far more diversified than that and sell to a broad range of industries including networking and switching, printing, storage and wireless. And can anyone really argue with thirty-four quarters of sequential growth?

It sounds like more blue skies ahead for Marvell as well. Though the first half of the year tends to be seasonally slow for the company, based on Q1 results and expectations for Q2, they have raised revenue expectations for the full year from a range of $2.25B to $2.30B to a revised range of $2.37B to $2.43B. And while it’s all well and good to have management bullish on the future, Marvell also has the backing of Wall Street, as a number of analysts were quick to upgrade the stock after the earnings announcement.

With the weakness that Marvell’s stock has seen since the beginning of the year, it is currently trading at around 30x analysts’ expectations for 2006 earnings. At a 27.5% expected 5-year growth rate, that’s a smokin’ 1.09x PEG ratio, a bargain when you compare it to companies like AMD that are trading at a 1.5x PEG. So with bullish management, bullish analysts, strong gross margins, thirty-four straight quarters of sequential growth and a nice consistency in beating analysts’ estimates, maybe Marvell can be a superhero in your portfolio after all.

MRVL 1-yr Chart

For full disclosure, I currently own shares in Marvell.