BofA Downgrades Marvell to Neutral, $225 Price Target

BofA analyst Vivek Arya downgraded Marvell (NASDAQ: MRVL) from Buy to Neutral, PT $225 (from $400).

“We downgrade MRVL to Neutral from Buy, maintain our estimates, but lower PO to $225 from $400 on potential for extended stock overhang from announced all-stock LITE deal, and from recent contraction in sector multiples (SOX index down -19% in past 1-month).

Our new $225 PO is based on 20x CY28E PE (inc. stock comp expense), versus 33x prior, though within 10x-29x range of optical and AI peer group.

Our concern centers around: 1) Extended regulatory process (1HCY28E close, per MRVL) including in China, 2) Limited EPS accretion as $1bn in cost cuts insufficient to offset the ~50% dilution in share-count, 3) Potential customer/channel conflict: MRVL supplies DSPs, TIAs and drivers broadly to optical module vendors, while LITE supplies lasers but also competes in transceivers.

There was no mention of any large M&A in MRVL’s recent analyst day, so the news comes as a considerable surprise.

Last, we question the impact on LITE’s valuation once its laser shortages are inevitably resolved.”

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