When you think of semiconductor stocks, some of the first names that come to mind probably include companies like NVIDIA (NASDAQ:NVDA), Intel (NASDAQ:INTC), and Qualcomm (NASDAQ:QCOM). While these popular names are a focus for many, sometimes taking time to explore the companies that aren’t as well-known can lead to stronger returns. We know that semiconductor companies are going to play a key role in 2021 and beyond thanks to the fact that they are so important for developing new technologies. That’s why a company like Marvell Technology (NASDAQ:MRVL) is worth a look.
The beauty of buying a company like Marvell Technology is that its products are used in some of the hottest end-markets today including 5G, Cloud, and Automotive. The stock is already off to a good start in 2021 and is up over 16% year-to-date. It’s one of the more underrated semiconductor companies in the market right now and is worth a look if you are interested in adding exposure to the industry. Here are a few reasons why Marvell Technology stock should be on your radar going forward.
A Diverse Portfolio of Chips
Marvell Technologies is a quality semiconductor name largely due to its diverse portfolio of chips. The company produces application-specific products used in data storage, communication, and consumer markets, which means it can generate revenues from a variety of different customers. Its chips are used in things like networking equipment, mass storage devices, and even automobiles. Some of the company’s prominent customers include Cisco (NASDAQ:CSCO), Intel, Hitachi (OTC:HTHIY), Toshiba (OTC:TOSYY), and Hewlett Packard. This diversity along with an established customer base is a great quality to look for in a long-term investment.
Since Marvell outsources a lot of its semiconductor fabrication to third-party foundries, it’s what is known as a “fabless” company. This is a good thing as Marvell doesn’t have to invest tons of capital to own and maintain a semiconductor foundry. That means it can invest more money into developing innovative and groundbreaking products instead of constantly having to invest more and more of its money into owning and maintaining a factory.
5G Opportunities Ahead
Another great reason to consider adding shares of Marvell is the fact that the company has some serious momentum working in its favor in the 5G space. Instead of buying a company that creates the chips for 5G handsets, why not look into a company like Marvell that is focused on the infrastructure side of things? More and more telecom operators are rolling out 5G in 2021, especially since a lot of them experienced delays caused by the pandemic. That means the demand for Marvell’s application-specific integrated circuits (ASICs) and embedded processors which are used in 5G-based stations should be very strong. The company is already seeing growth in networking revenue, which increased by 35% year-over-year in Q3 to $445 million.
Back in 2019, Marvell introduced a breakthrough end-to-end 5G platform that could speed things up for the deployment of 5G networks around the world. The company also recently announced an advanced 4G/5G radio unit design that can help network operators deliver stronger performance. Additionally, the company has made some recent acquisitions including mobile chip company Avera as well as semiconductor company Inphi (NASDAQ:IPHI) that has strengthened its position in the 5G market. With major orders from Samsung (KS:005930) and Nokia (NYSE:NOK) along with strong sales in China, 5G tailwinds are a major growth driver for the company going forward. As the rollout of 5G starts to pick up in regions outside of China, the sky is the limit for this company’s wireless infrastructure business.
Final Thoughts
Marvell Technology is a bright spot in the semiconductor sector that isn’t getting enough love from investors. The company was recently added to the NASDAQ-100 index, reported strong non-GAAP EPS growth Q3, and offers exposure to end-markets with serious growth potential over the next decade. After the company reported its fifth straight quarter of sequential 5G revenue growth in Q3, it’s clear that Marvell is executing on a high level. Combine that with a solid balance sheet and a 0.44% dividend yield and it’s easy to understand why the stock is compelling. Any pullbacks to $50 a share could be a dip worth buying.