Marvell Technology is currently down 54% from its highs, with more downside very possible given its current valuation.

Overview

Marvell Technology Inc is an American company, listed on the NASDAQ, that focuses on developing and producing semiconductors and related technology. Marvell stock is currently priced at $42.98, down 53% from its all-time high of $91.51. This stock has seen exceptional growth over the previous 5 years, however 2022 has seen Marvell Technology struggle along with the entire sector. Over the past couple of weeks, the stock has been given a rating downgrade by a number of analysts.

Financials

The total market cap of Marvell Technology is $36.6bn. Total revenue for the 12 months ending April 30 2022 was $5bn, a 63.4% increase YoY. But almost every quarter has been loss-making with Marvell losing $421m in 2021. Looking at the balance sheet, total assets sit at $22bn up 105% from 2021; While total liabilities are currently valued at $6.5bn, a 175% increase from 2021. Therefore, Marvell technology has net positive assets of $15.5bn, giving the company a L/A ratio of 30%, which is strong. Overall, the financials are okay for Marvell Technology, they have good revenue growth and a balance sheet that is positioned well to sustain an economic downturn, the only improvement would be to see profitability which has an effect on its valuation.

Technicals

From a technical aspect, the stock is conflicting. The stock is currently sitting at a support of $42 (2021 Support), however, a further decrease could see it test its support at $37. These are vital support levels, if we do not see a bounce back, then we could expect prolonged low prices. RSI currently reads at 33, indicating the stock nearly oversold, the last time RSI was this low was at the end of 2020, hence being a potential bullish signal for the stock. However, MACD reads negative as it has for most of 2022, hence indicating that the downturn in the stock may not be over. Towards the upside, the initial target is $49.17, followed by $60 and then $65. Overall, the technical analysis for Marvell technology is conflicting.

Summary

Overall, Marvell Technology has a very mixed outlook. The financials indicate the strong foundation and growth that Marvell Technology has experienced, which will be needed to weather the broader potential economic downturn. However, the technical picture is worrying, as any further decrease in the stock could indicate a prolonged bearish outlook for the company. It is also essential to consider the valuation. At this moment in time, Marvell has a $36.6bn valuation on $5bn revenue and a $420m loss. This gives it a value of 7.3x revenue. This is the same valuation metric as AMD (7.5x revenue) and they operated on a 19.3% profit margin in 2021, therefore, Marvell is somewhat overvalued on the fact it's just not profitable right now and with recession fears mounting the outlook isn't particularly strong.