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Why Marvell Stock Rallied Today
Key Points
Marvell plans to demonstrate its 2nm optical interconnects this week at the European Conference on Optical Communication.
One Wall Street analyst raised his price target, predicting Marvell will achieve nearly 50% revenue growth through fiscal 2030.
The stock is pricey, but growth of that magnitude warrants a premium.
Shares of Marvell Technology (NASDAQ: MRVL) gained ground on Monday, jumping as much as 6.1%. As of 2:37 p.m. ET, the stock was still up 6%.
The catalyst that sent the semiconductor and infrastructure specialist higher was an upcoming demonstration of its next-gen technology.
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Image source: The Motley Fool.
A chip off the old block
In a press release that dropped Sunday, Marvel announced plans to present its "industry-first 2 nanometer (nm) optical interconnect demonstrations to advance the next generation of AI data center connectivity" at this week's European Conference on Optical Communication in Málaga, Spain.
The company promises to deliver "faster, lower-power, and more secure optical interconnects" as data centers adapt their architectures to the needs of artificial intelligence (AI).
On the heels of that announcement, Morgan Stanley analyst Joseph Moore raised his price target on Marvell stock to $268 from $246, while maintaining an equal-weight (hold) rating on the shares. That represents 10% upside compared to Friday's closing price.
The analyst expects that, at its investor day on Oct. 6, management will forecast fiscal 2030 revenue of $40 billion plus, with its custom silicon and growing relationship with Alphabet's Google as the biggest drivers. Overall, Moore expects a positive reaction from investors.
That prediction requires context. For fiscal 2026, which ended in January, Marvell grew revenue 42% to $8.2 billion. The company is currently forecasting fiscal 2027 to grow 45% to $12 billion and fiscal 2028 revenue to grow 50% to $18 billion. The analyst's prediction suggests Marvell's 50% growth will continue through fiscal 2030.
Marvell stock is selling for 38 times next year's expected earnings, which is a bit pricey. However, if the analyst's forecast is accurate, the current premium may well be justified.
Danny Vena, CPA has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Marvell Technology. The Motley Fool has a disclosure policy.