What Makes Marvell (MRVL) Stock A Potential Pick Right Now?

The technology space continues to be investors’ favorite due to its dynamic nature. This field is anticipated to grow faster than ever before. Therefore, if you invest right, you can reap the benefits over time. Tech companies will continue to transform our world with each passing year. So, if you don’t want to be left behind, make sure you’re investing in quality tech stocks.

Below we have evaluated one technology company that has demonstrated remarkable share price performance so far this year. Marvell Technology Group Ltd. (NASDAQ:MRVL) generated high returns for investors in the last one year and has the potential to exceed expectations in the days ahead.

The stock gained approximately 43.5%, outperforming the Zacks categorized Semiconductor-Communications industry’s return of 41.1%.

Let’s look at the reasons behind Marvell’s solid momentum.

What’s Driving the Stock?

Marvell is a promising player in the solid state drive (SSD) controllers market. Over the coming years, it expects an increasing number of PCs/servers to use flash-based solid state technology for storage. The storage market is seeing a steady increase in demand, given fast-growing data volume, especially the exponential growth in unstructured data. NAND (non-volatile storage technology) demand is likely to remain robust this year as well.

SSD demand will also increase and could even surpass manufacturing capacity, leading to periodic shortage and higher pricing in the near term. Marvell is benefiting from growing demand for SSD products. This is evident from the company’s fiscal 2017 revenues from the storage end market, which accounted for majority of total revenues.

Furthermore, we believe that the strong demand for Marvell’s 4G LTE products could be a key growth driver. This will be supported by growth from the company’s wide range of recently-launched Internet of Things (IoT) solutions.

In addition, the company’s recent restructuring initiative will help Marvell improve its cloud infrastructure and applications, which are expected to drive the top line. The latest buyback scheme also reflects the company’s sound financial position and favorable prospects.

Also, the company’s back-to-back three quarters of better-than-expected bottom-line results has boosted investor’s confidence over the stock. Apart from this, an encouraging first-quarter 2017 outlook provided in the last quarterly earnings conference call also makes us optimistic about its near-term performance.

Upward Estimate Revisions

In the last 60 days, the Zacks Consensus Estimate for the current quarter and fiscal 2018 witnessed upward revisions. For the current quarter, the Zacks Consensus Estimate is pegged at 16 cents, up 5 cents from earnings of 11 cents projected 60 days ago. Similarly, the Zacks Consensus Estimate for fiscal 2018 is currently pegged at 83 cents compared with 68 cents projected 30 days ago.

Valuation Looks Attractive

From a valuation perspective, the stock looks attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. Marvell currently trades at a forward P/E of 18.3x compared with the industry group average of 21.9x.

Hence, there is still much momentum left in this Zacks Rank #2 (Buy) stock, which is quite evident from its VGM Style Score of “B” and long-term earnings growth rate of 14.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Keeping these positives in mind, we believe that Marvell is one such technology stock that deserves a place in investors’ portfolio.

Other Key Picks

A few other stocks worth considering in the broader technology sector are Applied Optoelectronics, Inc. (NASDAQ:AAOI) , Broadcom Ltd. (NASDAQ:AVGO) and Micron Technology Inc. (NASDAQ:MU) , all sporting a Zacks Rank #1. Applied Optoelectronics, Broadcom and Micron have expected long-term EPS growth rate of 18.3%, 13.6% and 10%, respectively.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.

Click here for Zacks' private trades >>