Chip designer Marvell Technologies
But Marvell's share price didn't follow suit. A slight pop was quickly erased, and Marvell shares can be had at a 2.7% discount now. Is this a buy-in opportunity or a signal of further price drops to come?
Analysts are divided on that issue. Canaccord Genuity and Needham kept their existing "buy" ratings on the stock after the first-quarter report while Nomura stuck to a "reduce" grade, which seems like a mildly bearish variation of "hold." The bulls and the bear disagree on some very fundamental issues.
The bullish firms see strong and rising demand for Marvell's networking chips and storage controllers. In particular, increasing orders from China Mobile
But Nomura doesn't buy that rosy view. "One good quarter does not signify a trend," the firm noted. The growth prospects for Marvell's core markets of networking, storage, and wireless technologies look limited, and huge sales of lower-margin wireless chips could cut Marvell's gross margins. That's how Nomura gets to a $13 price target while the more optimistic firms look for roughly $20.
Nomura is absolutely correct on the limited long-term value of short-term swings, but I disagree on the firm's view of the storage and networking markets.
For one, hard-drive builders Seagate Technology
I could tell you a similar story about exploding networking demand, and you've already seen the projected market for next-generation networking in China. In short, I'm siding with the bulls here. Marvell's markets look very healthy from here, and it's a mistake to bet against the company today.
Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Western Digital and China Mobile. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.