Marvell a lucrative acquisition target
In this series, we saw that Marvell Technology (MRVL) has been going through a rough patch over the past year amid an accounting probe. Investors lost confidence in the company’s previous management, which called for new management. Starboard Value saw opportunity in the troubled company and was quick to grab it, acquiring a 6.7% stake.
Marvell is likely to be a potential acquisition target with an enterprise value of $2.6 billion, a cash reserve of $2 billion, and zero debt. It’s a good target for companies such as Qualcomm (QCOM), which are looking to grow in the IoT (Internet of Things) space.
Marvell’s stock price movement
Over the past 52 weeks, Marvell’s stock has fallen by 28%. It’s currently trading just above $9.5, which is 10% above its book value of $8.65. The company has a beta of 0.74, which is higher than STMicroelectronics’ (STM) beta of 0.37 but lower than Texas Instruments’ (TXN) beta of 1.28.
Beta is a measure of volatility. A beta of greater than 1 is highly volatile, and a beta of lower than 1 is less volatile.
Of the 17 Wall Street analysts monitoring MRVL’s stock, six have “buy” recommendations, ten have “hold” recommendations, and one has a “sell” recommendation on the stock. The stock has a median target price of $11 and is currently trading at a discount of 15.4%.
- STMicroelectronics stock has a median target price of $6.79 and is currently trading at $5.85—a discount of 16%.
- Texas Instruments’ stock has a median target price of $60 and is currently trading at $62.11—a premium of 3.4%.
Marvell is a less volatile stock than its peers, and it’s likely to offer strong dividends under its new management. The stock is likely to bounce back if the new management successfully leverages the company’s strength in the IoT and storage spaces to tap IoT growth. It could also benefit if the company finds the right buyer.
The VanEck Vectors Semiconductor ETF (SMH) has holdings in 26 semiconductor stocks, including 14.2% in INTC, 5.1% in TXN, and 7.5% in QCOM.