Starboard Value takes 6.7% stake in Marvell
Shares of semiconductor company Marvell Technology Group (MRVL) rose 11% in the trailing-five-day period after activist investor Starboard Value announced a 6.7% stake in the company. Starboard sees MRVL as undervalued, believing that it can boost its margins by cutting costs.
Starboard has stated that Marvell could even exit the mobile-device business, as it has failed to live up to expectations. In September 2015, Marvell said that it would scale back its mobile business and cut approximately 17% of its workforce.
Why Marvell’s stock fell in 2015
Marvell’s stock fell sharply last year as Glancy Prongay & Murray (or GPM) announced its investigation of potential claims on behalf of Marvell’s investors. There were concerns about the company’s violations of federal security laws after its disclosure of potential fraudulent policies and an unexpected loss in 2Q15. Marvell reported a loss of $382.4 million in 2Q15, compared to analysts’ consensus estimate of an $11.9 million profit.
Out of 28 analysts covering the stock, three have issued “buy” recommendations, six have issued “sell” recommendations, and 19 have issued “hold” recommendations for Marvell. The analyst stock price target for the company is $9.85, with a median target estimate of $9.5. Marvell is thus trading at a discount of 2.2% to its median target.
Marvell constitutes 1.3% of the iShares PHLX Semiconductor ETF (SOXX) and 2.8% of the SPDR S&P Semiconductor ETF (XSD). Peer companies Texas Instruments (TXN) and Cavium (CAVM) make up 7.8% and 1% of SOXX, respectively.