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Buy this Great Semiconductor Stock Before Earnings for Tech Growth?

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Technology stocks have gone on a wild ride over the past several weeks. Tuesday’s craziness that saw the Nasdaq sink over 2.5% in morning trading, before recovering a large chunk of those losses by the end of the day, helps highlight tech’s standing on Wall Street.

Despite the recent setbacks, tech companies have posted impressive fourth quarter financial results and their outlooks have improved. Most of the big names, from Apple (AAPL - Free Report) to Microsoft (MSFT - Free Report) have already reported their quarterly results. In fact, we now have Q4 results from 91% of the technology sector’s total market capitalization in the S&P 500.

But that doesn’t mean it’s too late to find strong tech stocks to buy amid the stronger-than-projected earnings season. Now, let’s dive into Marvell Technology Group Ltd. (MRVL - Free Report) ahead of its Q4 fiscal 2021 financial release on March 3 to see why it might be worth buying.

Tech Update

Wall Street pulled profits out of nearly every name in technology since the Nasdaq hit records on February 12. But buyers stepped in Tuesday afternoon after the index nearly hit its 50-day moving average, and the Nasdaq then jumped 1% during regular trading Wednesday.

The recent downturn was attributed to worries about tech valuations, as Treasury yields climb. The pullback was certainly healthy, but Wall Street is hardly nervous about the technology sector’s long-term growth outlook.

Marvell’s Fundamentals

Marvell is an infrastructure semiconductor solutions firm. MRVL’s storage, network infrastructure, and wireless connectivity offerings are set to benefit from the continued growth of cloud computing and the 5G revolution.

MRVL announced last October its plan to buy Inphi (IPHI - Free Report) to boost its standing and offerings within these key growth areas of tech. The deal is projected to close by the second half of this calendar year.

In a showcase of its growth and size, Marvell was added to the NASDAQ-100 Index in December. This puts it in the same ballpark as chip firms such as Nvidia (NVDA - Free Report) and Broadcom (AVGO - Free Report) , as well as nearly all of the biggest tech names in the world.

MRVL stock has soared 415% in the last five years to blow by the Zacks Tech Sector’s 175% and its industry’s 80%. More recently, it is up 120% in the trailing 12 months. Investors might also find a juicier entry point since the stock has cooled off recently. Marvel is currently trading around 10% below its January records at roughly $49 per share.

 

 

The recent downturn has pushed its RSI to 45, which is below levels that are considered neutral. For instance, any number above 70 on the Relative Strength Index is often regarded as overbought, while anything below 30 is oversold. And Marvel stock popped during regular trading Wednesday, amid the tech rebound.

Wall Street has been willing to pay a slight premium for MRVL shares compared to its industry for years. It currently trades near its six-month median of 8.8X forward sales, which marks a discount to giants such as Microsoft’s 10.1X and Nvidia’s 17.6X.        

What Else

Zacks estimates call for Marvel’s fourth quarter revenue to climb 10% to reach $786.2 million, with its adjusted earnings projected to surge 71% to $0.29 a share. More broadly, its fiscal 2021 sales are expected to jump 10% to roughly $3 billion to help lift its EPS by 41%.

MRVL’s FY22 outlook appears even more impressive, with its revenue expected to surge 18% higher to $3.5 billion, while its earnings are set to come in 46% stronger.

Marvell’s Semiconductor–Communications space, which includes NeoPhotonics (NPTN - Free Report) and others, sits in the top 8% of our over 250 Zacks industries. Plus, 16 of 22 brokerage recommendations that Zacks has for the stock come in at a “Strong Buy,” with none below a “Hold.” And Marvell pays a dividend that is currently yielding roughly 0.50%.

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