William Blair & Company initiated research coverage of Marvell Technology Group Ltd. (MRVL $24.89), a fabless semiconductor supplier focused on storage, networking, and connectivity end-markets.
Analyst Alessandra Vecchi estimated the company would generate revenue of $2.75 billion in fiscal 2020 and $3.21 billion in fiscal 2021. She sees the opportunity for gross margin to exceed 66% and operating margin to reach 35% exiting fiscal 2022/early 2023.
"We believe Marvell is entering a new phase of its transformation," Vecchi said. "Prior phases of Marvell's evolution included restructuring, a full refresh of the networking product portfolio, a heightened focus on infrastructure markets, and the acquisition and integration of Cavium. We believe its next phase, which expands into new growth vectors including 5G, automotive, and ARM-based server builds, is just beginning. We estimate this should pave the way for several years of strong revenue growth—potentially above the company's long-term target model of 6% to 8%. Entry into the 5G and automotive markets increases the company's addressable market to $18 billion, while AI, which is still viewed as an internal start-up, is potentially additive in the future."
Vecchi continued, "We view 5G as the company's most exciting near-term growth opportunity given: 1) a quadrupling of dollar content in the baseband as compared with 4G at its lead customer Samsung; 2) the potential for Samsung to gain 5G base station unit share; 3) a semi-custom baseband win at Nokia; and 4) for the first time, content in the remote radio head. Overall, we anticipate Samsung will begin to ramp up production at the end of year with Nokia following in the second half of fiscal 2021."
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