Marvell Technology (MRVL) stock price has crashed for three consecutive days, reaching a low of $86.30, its lowest level since November 4. MRVL has plunged by over 27% from its highest level this year. So, will the MRVL share price rise or fall after earnings?
Marvell Technologies stock falls ahead of earnings
Marvell has become one of the top companies in Wall Street. It has soared by over 175% from its lowest level in 2023.
The company has done well after reaching numerous deals some of the biggest American companies like Amazon and Microsoft. In December, it signed a five-year deal with Amazon’s AWS, a move that will see it build for it custom artificial intelligence chips.
There are rising odds that the company will reach agreements with other large companies like Microsoft and Google as they seek to boost their market shares.
The MRVL stock price will be in the spotlight this year as the company publishes its financial results. Analysts expect the results to show that the revenue jumped by 25.9% in the last quarter to $1.8 billion. This revenue growth will bring its annual figure to $5.75 billion.
Marvell Technology’s earnings per share is expected to move to 59 cents, up from 46 cents a day earlier. The annual EPS will be $1.56, higher than the $1.51 it made a year earlier.
There are chances that the company’s earnings will be higher than expected since it tends to be highly conservative when issuing its guidance.
Read more: Three reasons why Marvell Technologies stock is poised for a rally
Q3 earnings download
The most recent results showed that Marvell Technology’s business did well in the third quarter. Its revenue rose by 7% to $1.5 billion, helped by the data center segment, whose revenue surged by 98%.
Marvell Technology’s non-data center business, including enterprise and carrier rose by 4%, while the industrial and consumer fell by 22% and 43%.
The biggest risk the company faces is that the data center business may start to slow down in the next few years.
Many large companies, such as Amazon, Microsoft, and Google, are expected to invest over $312 billion in AI this year.
The challenge, however, is that these investments will likely take long to pay off. For example, Microsoft is yet to benefit substantially from its Copilot product that many companies believe is expensive and unnecessary.
The rising hope that the data center business will slow explains why many semiconductor stocks like AMD and Intel have plunged.
Valuation concerns remain
The main concern for Marvell Technology stock isthat it is highly overvalued considering that it has a $80 billion valuation. According to SeekingAlpha, it has a non-GAAP PE ratio of 58, higher than the sector median of 23. Its enterprise value to EBITDA is 204, much higher than other companies.
Historically, companies like Marvell Technology have managed to maintain their high valuations as long as the growth momentum.
Marvell Technology stock price analysis
MRVL chart by TradingView
The weekly chart shows that the MRVL share price peaked at $127.77 earlier this year and then crashed to a low of $86.15. It moved slightly below the key support at $92.57, the upper side of the cup and handle pattern, a popular continuation sign.
On the positive side, Marvell stock has remained above the 50-week Exponential Moving Average (EMA). It has also formed a hammer candlestick pattern, which is characterized with a body and a long lower shadow.
Therefore, while Marvell Technology is overvalued, there is a likelihood that it will bounce back later after earnings. Such a rebound may see it jump to $100 followed by $110.
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