Investors are growing increasingly bullish on Marvell Technology's (MRVL 3.17%) prospects. The stock has climbed 98% over the last year and 39% year to date. Even with that big price jump, Rosenblatt analyst Hans Mosesmann reiterated a buy rating on the stock earlier this week with a near-term price target of $100. Hitting that target implies a 19% price jump over the next 12 months.
Demand for Marvell's semiconductor solutions tied to artificial intelligence (AI) is taking off. As a result, analysts expect the company to return to growth in the near term, which is the main reason behind the stock's performance.
Marvell's data center growth is accelerating
A massive upgrade cycle is underway in the data center market to facilitate AI workloads. Nvidia has been the torch bearer of this opportunity so far, but it is spilling over to other component and systems makers, which includes Marvell's data infrastructure products.
Data center revenue made up 39% of Marvell's business last quarter and grew 21% in fiscal Q3 over the previous quarter. Management guided for data center revenue to grow in the mid-30% range in fiscal Q4 quarter over quarter, and that is causing analysts to raise their estimates.
Marvell is expected to report a full-year decline in revenue for fiscal 2024 (which ended in late January 2024) before returning to growth in fiscal 2025. As for earnings, analysts are projecting an EPS of $1.51 this year before growing to $3.75 per share by fiscal 2027.
The stock's high forward price-to-earnings ratio of 40 suggests that investors are counting on the company to beat those estimates, which it may have to do to justify the premium valuation on the shares. The company may continue to report weak overall revenue growth in the near term, but as long as data center revenue is growing at high rates due to AI demand, the stock may continue to hit new highs in 2024.
