Marvell Technology Group Ltd. (NASDAQ:MRVL) has been upgraded to a ‘Buy’ rating by Bank of America analysts following the company’s fourth quarter earnings report, as investors reacted positively to the company’s outlook and growth initiatives.
The firm also raised its price target on the stock to $110 from $90, as the stock jumped almost 20% to $90.
The analysts cited Marvell’s leverage to AI optical connectivity, improved visibility on Microsoft and Amazon custom chip (XPU) programs, and optimism about the company’s growth trajectory.
They wrote that the company’s earnings call increased its confidence in Marvell’s strong position in AI optical connectivity, its prospects with Microsoft’s upcoming custom chip (XPU) program, and the company’s progress on the Amazon XPU transition.
Marvell’s broad portfolio, spanning 800G/1.6T connectivity, optics, custom XPU, scale-out and scale-up switches, and related components, was highlighted as a strategic strength.
“Our ~$2 billion/~$4 billion estimates in MRVL’s custom chip program for calendar year 2027/2028 provides significant upside potential relative to the multi-$100 billion capex at large XPU customers (Amazon, Microsoft),” the analysts wrote, noting the company’s strong market share in optical DSP as AI clusters expand.
The firm also raised its financial year 2027 and 2028 sales estimates by 8% and 12%, respectively, with pro forma EPS projected at $3.82, up 34% year-over-year, for 2027 and $5.43, up 42% year-over-year, for 2028. “For the first time in a long time, our out-year estimates are going up meaningfully,” the analysts wrote.
Despite the positive outlook, Bank of America flagged risks including lower free cash flow relative to peers and competition in the XPU market.
“Competition in both XPU large programs remain, with customer insourcing AND other external design partner, both up for market share gains,” the analysts wrote, also noting potential headwinds from AI stock fatigue and underperformance earlier this year.
Marvell trades at roughly 16 times calendar year 27 estimated earnings and four times enterprise value-to-sales (EV/S), a valuation the analysts described as compelling relative to peer companies trading at 29 times PE and nine times EV/S.
