Marvell (MRVL): Solid Channel Checks, Will Beat Q2 Earnings

Marvell (MRVL) reports Q2 earnings on Thursday, August 28th, after the close. FBR expects a ‘beat and raise’, and is raising its revenue and EPS estimates, and target (from $23 to $24) accordingly.

Recent checks suggest Marvell’s 2Q business tracked slightly ahead of guidance on strength in networking (Ethernet switch, Wi-Fi) and storage shipments. For 3Q, we think Marvell will guide revenues to $900M, a 6% sequential growth off of a slightly better base of shipments in 2Q, though it is possible that guidance is even better than that.

While some worry that production cuts at Taiwan Semi mean business is slowing, most investors do not see the increasing production at SMIC. With top storage customer Western Digital guiding hard drive units to grow 8%-14% sequentially in 3Q, and with limited inventory impacts there, we think Marvell’s storage chip shipments should grow by 5%-11% sequentially (+8% midpoint).

FBR again looks to Research In Motion (RIMM) as a catalyst for MRVL:

Further, we think cellular shipments to RIMM (for the Blackberry Bold and maybe the Thunder) will drive big unit increases in 3Q. Further, Wi-Fi shipments appear likely to grow greater than 6% sequentially. Given this, an 8%-10% sequential revenue guide is possible.

In the end, FBR’s positive thesis on MRVL can be boiled down to these 4 factors:

  • global demand is better than feared
  • inventories are normal
  • investor expectations are muted
  • stock valuation is attractive

FBR reiterates OUTPERFORM on Marvell (MRVL), target raised from $23 to $24.

See Also:
Marvell (MRVL) Wilts Under Price Pressure, Research In Motion (RIMM) Concerns
Apple iPhone (AAPL) Supplier Update: Bad For Broadcom (BRCM), Fine For Marvell (MRVL)*

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