Why Marvell Technology shares rose 29% on Friday

What happened

in the footsteps nvidia (NVDA 2.16%)that rose yesterday, Marvell technology (MRVL 28.98%) Outside the Races on Friday Afternoon – Up 28.6% as of 1:05pm ET. Actually, this is equal better Outperforming the 24.4% gain Nvidia shareholders enjoyed yesterday!

Again, the reason is profits.

Heading into its first-quarter 2024 financial report, analysts expected the semiconductor specialist to earn $0.29 per share (adjusted for one-time items) on sales of $1.3 billion. In fact, Marvell earned $0.31 per share, and sales were $1.3.2 one billion.

so what

So Marvel beat earnings last night. However, not all news was good.

Fiscal sales for the first quarter were actually down 9% year-over-year (although that was a smaller drop than analysts expected, and also a smaller drop than Nvidia suffered). While Marvel reported that modified Its earnings, as calculated under Generally Accepted Accounting Principles (GAAP) were actually negative — a loss of $0.20 per share.

Now, you might not expect investors to be so excited about the company losing money and “beating sales” by less than 2%. But it’s possible that Marvell’s lower performance in its fiscal first quarter, and more of its forecast around its fiscal second quarter, is the reason why the share price is higher today.

In terms of guidance, Marvell CEO Matt Murphy said sales will grow sequentially in the second quarter, to $1.33 billion plus or minus 5%, and “accelerate in the second half of this fiscal year.” Moreover, “artificial intelligence has emerged as a major growth driver for Marvell [and] … We expect AI revenues in fiscal 2024 to at least double from the previous year and to continue to grow rapidly in the years to come.”

What now

What does this mean in dollars and cents? Well, sad to say, Marvell’s outlook for the second quarter of the year isn’t quite as good news as some investors think.

One year ago, Marvell booked $1.52 billion in revenue for the second quarter of its 2023 fiscal year. Last quarter, the company posted $1.32 billion. So Marvell could technically increase revenue to $1.33 billion in the second quarter of fiscal 2024… and still suffer from lower revenue year-over-year.

I suspect that’s what investors are hoping for — and it’s probably not what they thought they read in the earnings report, either.

Likewise with long-term projections. Marvel says its AI revenue will double this year. Well and good. But Marvell isn’t a big player in AI yet, so AI revenue will make up a small portion of Marvell’s total revenue. In fact, CEO Murphy admitted that “we’re still in the early stages of our AI ramp.” In terms of total revenue, on average, analysts expect just $5.48 billion in total revenue for Marvell this year — and if that happens, it’ll be 7.5%. drop in revenue for Marvell.

Again – I would be shocked if investors were so hopeful about this outcome. And I wouldn’t be surprised to learn that when investors heard Murphy was promising double revenue for artificial intelligenceThey thought they were hearing it the total Revenue will double.

Which they will not do.

In short, I think the investors flocking to buy Marvell stock today are making a mistake. The best way to play today’s rally in the stock may actually be to… take the money and run.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has and recommends positions at Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.

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