Marvell Technology Group Ltd. (MRVL): One of Tech’s Most Unloved Growth Stocks

Page 1 of 2

The phrase, “catching a falling knife” is overused for bear arguments. Whenever a company’s stock price crashes and bargain hunters swoop in for the deals, investing threads are flooded with the adage. Of course, sometimes it’s appropriate, but largely it is a hyperbolic statement. For Marvell Technology Group Ltd. (NASDAQ:MRVL), the pall cast by being associated with the dying PC industry has left the company with a depressed market value that fails to accurately account for the direction of the company. While it may be unfortunate in the short term for the company’s shareholders, Marvell Technology Group Ltd. (NASDAQ:MRVL) presents an attractive buy opportunity for the far-sighted.

A history of doing just fine
Marvell Technology (MRVL)Investors and analysts sometimes seem to forget that being a technology company involves a constant cycle of innovation and irrelevance. It’s a fast-moving industry, and the successful players find ways over time of reinventing the company to address current and future trends. The death of the PC is a popular trope these days, and for good reason, but it has dragged down the value and image of perfectly good companies.

Of course, we can point to giants that fell behind in innovation — Microsoft Corporation (NASDAQ:MSFT), Hewlett-Packard Company (NYSE:HPQ), maybe Apple Inc. (NASDAQ:AAPL) in five years. The thing is, it is not inherently bad to have been a major player in a technology that is being eclipsed — as long as you keep moving forward. I believe that is what semiconductor maker Marvell Technology Group Ltd. (NASDAQ:MRVL) is doing, while the market values it as a retiring dinosaur.

This PC-ocalypse has been in the making for at least five years (if not 10). If Marvell was to die with the PC, it would make sense for its long-term earnings growth to decline. But, over the past five years, Marvell has grown roughly 10.6% on an annualized basis. On the ever-important cash-flow front, that five-year number goes to 13.6%. The company continued making money on its product lineup for as long as it could, and now that product cycle is shifting out and making room for the next. This creates a short-term earnings (and price) dip, before the next round begins.

What’s on tap
Admittedly, Marvell is coming off a tough year. On an annual basis, net income took a bath, sinking 50% to just $304 million. The top line wasn’t as devastating, with revenue down just 7% over the prior year. The company ended 2012 with a lawsuit loss to Carnegie Mellon University, which alleged that Marvell infringed upon two of the school’s patents. The judge ordered a $1.1 billion penalty, but analysts are quick to point out that Marvell’s manufacture, distribution, and sale of products in question takes place almost exclusively outside of the United States. Hedge fund guru David Einhorn strongly believes this fee will be reduced substantially, or eliminated all together.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!