Marvell Technology Group (NASDAQ:MRVL) looked like a top pick to benefit from the rollout of fifth-generation (5G) wireless networks this year, but investment banking firm Cowen believes the chipmaker is going to disappoint. Cowen recently slapped Marvell stock with a double downgrade -- reducing it to underperform from outperform -- stating the company's limited presence in China will handicap its 5G opportunity.

Cowen analyst Karl Ackerman believes Marvell won't be able to deliver on the rosy revenue and earnings forecasts that investors are anticipating. Ackerman said the company has little market share with network providers rolling out 5G in China, and its incremental revenue growth will be nowhere near what Wall Street is predicting.

More specifically, the Cowen analyst predicts Marvell is on track to generate $450 million in incremental revenue over the next couple of years. That's well behind the $850 million consensus estimates are looking for. So, does this mean that investors should start dumping Marvell stock? Let's take a closer look.

Person holding a 5G smartphone.

Image source: Getty Images.

Marvell has a big presence in China

Marvell's recent SEC filing reveals that 39% of its revenue comes from shipments to China, and that level has remained consistent throughout the year. For the first nine months of Marvell's recently concluded fiscal year 2020, shipments to China accounted for 40% of the company's revenue.

Meanwhile, the company's revenue is split almost equally between its two business divisions. Networking accounted for 50% of Marvell's revenue in the fiscal third quarter, while storage supplied 43%.

Marvell does not explicitly state how much of its networking or storage products are shipped to China. But the above discussion does indicate that the chipmaker's wireless business may have substantial exposure to the Chinese market that could help it take advantage of the 5G rollout. After all, Marvell was hit hard last year when the U.S. government added Huawei to the Entity List and limited its licensing options in the U.S. 

The chipmaker had also indicated that Huawei accounted for a mid-single-digit percentage of the company's overall revenue. On the other hand, Marvell reportedly has exposure to the Chinese market through networking specialist Cisco. The networking giant can sometimes account for 11% of Marvell's quarterly revenue, as pointed out by Summit Insights Group analyst KinNgai Chan last year (via Reuters).

So, there's a possibility that Marvell may have substantial exposure to the Chinese 5G market through the likes of Huawei and Cisco.

The 5G catalyst will come into play gradually

On the last earnings conference call, Marvell management made it clear that South Korea will be the prime driver of its 5G revenue in the next few quarters.

"The third quarter was just the start of the 5G ramp for us as it was driven primarily by a single region," CEO Matt Murphy said. "We expect these initial deployments in Korea to continue to be the main driver for our 5G revenue for another couple of quarters and we should start to see the benefit from other geographies later in fiscal 2021."

Murphy also added that he expects Marvell's 5G business to gain critical mass only in the second half of fiscal 2021. Moreover, the U.S. Department of Commerce started approving licenses that allow U.S. firms to export their products to Huawei last November. This may open up a possibility for Marvell to tap into the Chinese 5G space earlier than anticipated.

It won't be a good idea to discount the company's 5G opportunity as early as Cowen suggests. Marvell investors also shouldn't forget that the deployment of next-generation wireless networks will have a positive impact on the company's storage business.

It is expected that the deployment of 5G services will boost demand for NAND flash storage this year. In fact, NAND flash demand is anticipated to jump 19% this year, according to IC Insights. This is great news for Marvell Technology as the chipmaker sells SSD (solid-state drive) controllers to big memory-industry players such as Western Digital, Seagate, and Toshiba.

It would be a good idea for investors to hold on to Marvell Technology stock as it seems capable of delivering the turnaround that Wall Street is anticipating. According to consensus estimates compiled by Yahoo! Finance, Marvell could deliver double-digit top-line growth this year along with a nice bump in its earnings. If that's indeed the case, then don't be surprised to see Marvell sustain its impressive momentum and remain a top growth stock in 2020.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.