TD Cowen Upgrades Marvell to Buy, $350 Price Target

TD Cowen analyst Sean O’Loughlin upgraded Marvell (NASDAQ: MRVL) from Hold to Buy with a price target of $350 (from $245).

“Upgrading Marvell as the fundamental growth drivers for the company have, in our view, now fully shifted to the company’s strong connectivity franchise and more importantly the concentration (and margin) risk associated with custom XPU programs has been largely de risked.

An aggressive but reasonable and diverse forward outlook could generate >$30 in EPS within 3 years. Upgrade to Buy, PT to $350.

Our ill-fated downgrade of Marvell shares a year ago was based primarily on two factors: (1) we anticipated share loss in the company’s core connectivity franchise, especially in optical DSPs; and (2) we viewed the custom XPU business as structurally challenged, as custom ASIC volume ramps are always planned-for but never guaranteed and forces Marvell to compete against much lower margin ASIC houses in Asia (a dynamic we explored in depth here).

Frankly we were very wrong on the first point (and the connectivity market itself has grown much more aggressively than we had modeled at the time), but we continue to believe the custom XPU business is one that faces structurally challenging economics (not just for Marvell).”

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