Shares of data infrastructure semiconductor solutions provider Marvell Technology, Inc. (MRVL) have gained 18.9% in price over the past month to close yesterday’s trading session at $85.43. Also, the stock soared to hit its $88.49 all-time price high on December 3, 2021, on the back of better-than-expected third-quarter results.

MRVL's net revenue increased 61.5% year-over-year to $1.21 billion for the quarter, beating the consensus estimate by 5.5%. While its non-GAAP net income increased 116.4% year-over-year to $364.32 million, its non-GAAP EPS came in at $0.43, up 72% year-over-year and 12.2% higher than the consensus estimate.

On December 2, the Hamilton, Bermuda-based company introduced the industry's first multi-gig Ethernet camera bridge solution, the 88QB5224, for best-in-class video distribution in connected vehicles. However, MRVL faces intense competition from other players in the semiconductor space, such as NXP Semiconductors N.V. (NXPI) and Micron Technology, Inc. (MU). Moreover, MRVL’s President, Products and Tech, Raghib Hussain, sold 324,957 shares in November, and its Director, Michael Strachan, sold 5,000 shares in September. So, MRVL’s near-term prospects do not seem very promising.

Click here to checkout our Semiconductor Industry Report for 2021

Here are the factors that could shape MRVL’s performance in the coming months:

Industry Headwinds

Governments and organizations have been taking steps to ease the ongoing, global semiconductor chip shortage. However, according to a Deloitte report, the semiconductor shortage could last until early 2023. Furthermore, according to a CNBC report published last month, top tech investor Paul Meeks warned Wall Street that it underestimates the semiconductor shortage and that it  will take years rather than months to resolve due to the supply chain backlog. So, MRVL’s business could also be harmed.

Acquisition of Innovium May Not Support Revenue Growth

MRVL acquired Innovium, Inc. on October 5, 2021. Innovium is a leading provider of networking solutions for cloud and edge data centers. The company’s results for its fiscal third quarter included the results of Innovium from its acquisition date. So, Innovium’s results helped MRVL witness 13% revenue growth sequentially. However, MRVL’s revenue is expected to increase 9.1% sequentially in the fourth quarter, representing decelerating growth.

Lofty Valuation

In terms of forward non-GAAP P/E, MRVL’s 53.75x is 123.6% higher than the 24.04x industry average. The stock’s 16.82x forward EV/S is 317.6% higher than the 4.03x industry average. In addition, its 48.49x and 15.87x respective forward EV/EBITDA and P/Sare higher than the 15.72x and 3.94x industry averages.

POWR Ratings Reflect Bleak Prospects

MRVL has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MRVL has a D grade for Value, which is in sync with its higher-than-industry valuation ratios.

The stock has a D grade for Stability, consistent with its beta of 1.07.

MRVL has a D grade for Quality. This is in sync with its negative trailing-12-month net income margin versus the 6.40% industry average. Its trailing-12-month ROCE, ROTC, and ROTA are also negative, compared to the 8.40%, 4.97%, and 3.62% respective industry averages.

In addition to the POWR Rating grades I have just highlighted, we have also rated the stock for Growth, Sentiment, and Momentum. Get all the MRVL ratings here.

Also, MRVL is ranked #87 out of 99 stocks in the Semiconductor & Wireless Chip industry.

Bottom Line

MRVL’s revenue and EPS are expected to increase 33.2% and 42.1%, respectively,  year-over-year to $5.72 billion and $2.16 in the next year. Impressive third-quarter earnings also helped the stock to hit its all-time high on December 3, 2021. However, the stock seems to have hit its peak and looks overvalued at the current price level. So, we think it could be wise to avoid the stock now.

How Does Marvell Technology (MRVL) Stack Up Against its Peers?

While MRVL has an overall POWR Rating of D, one could check out the following A-rated (Strong Buy) stocks within the Semiconductor & Wireless Chip industry: Broadcom Inc. (AVGO), Semtech Corporation (SMTC), and United Microelectronics Corporation (UMC).

Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in AVGO for a 25% gain. Learn more about the RTR service here.

Click here to checkout our Semiconductor Industry Report for 2021

MRVL shares fell $85.43 (-100.00%) in premarket trading Tuesday. Year-to-date, MRVL has gained 80.28%, versus a 23.91% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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