Semiconductor stocks like Marvell Technology Group Ltd. (NASDAQ: MRVL) have not exactly been the best performers for investors in recent years as its largely trailed the SPDR S&P Semiconductor ETF (NYSEARCA: XSD) while the semiconductor industry itself is a highly cyclical sector correlated with the performance of the global economy. Given the state of the global economy since the 2008 financial crisis, it should not come as a surprise to anyone that semiconductor stocks have been giving a mixed performance. However, it might just be the right time to get into Marvell Technology Group?
What Are the Marvell Technology Group and the SPDR S&P Semiconductor ETF?
Founded in 1995, the Marvell Technology Group has a US operating subsidiary based in Santa Clara and international design centers located elsewhere in the USA, Europe, Israel, India, Singapore and China. Marvell Technology Group is a leading fabless semiconductor company with three segments ( Mobile &Wireless, Networking, and Storage) that ships over one billion chips a year for the mobile, digital entertainment, cloud services, education, smart energy and plug computer sectors. However, the majority of company sales comes from the Storage segment with its three big customers accounting for over 40% of sales for this year.
As for the SPDR S&P Semiconductor ETF, it attempts to track and replicate the performance of the S&P Semiconductor Select Industry Index by investing in approximately fifty semiconductor stocks.
What Do You Need to Know About the Marvell Technology Group?
Before you invest in the Marvell Technology Group, there are a couple of things you need to be aware of. First of all, there were filings about hedge fund manager David Einhorn selling around 1.7 million shares of MRVL back in April, but he continues to hold some 50 million shares or just under 10% of the company.
Back in February, the Marvell Technology Group reported better-than-expected fiscal fourth quarter results of net income $50 million on $775 million in revenue verses $81 million on revenue of $743 million (results were helped by a "North American mobile customer"). More importantly, the Marvell Technology Group gave a more upbeat forecast as it continues to pick up market share and its mobile division has begun to grow again. It also repurchased 34 million shares worth $283 million during the quarter and has been a steady repurchaser of shares for some time now.
Perhaps the biggest problem the Marvell Technology Group faces came near the end of last year when a jury in Pittsburgh when the company loss a lawsuit brought by Carnegie Mellon University. Specifically, the jury found that the Marvell Technology Group had literally and willfully infringed two CMU patents and they awarded the university $1.17 billion in damages or about 50 cents per chip. Of course, this verdict will be appealed and the amount of damages could end up be lower or thrown out. Nevertheless, the Marvell Technology Group is sitting on about $2 billion in cash or short term investments – more than enough to cover any fine plus there is a detailed FAQ posted on its website here.
Finally, the Marvell Technology Group has a trailing P/E of 20.50 and a forward P/E of 12.30 along with a forward dividend of $0.24 for a 2.2% dividend yield.
Stock Performance: Marvell Technology Group Verses the SPDR S&P Semiconductor ETF
On Monday, Marvell Technology Group rose 1.28% to $11.07 (MRVL has a 52 week trading range of $6.98 to $14.00) for a market cap of $5.55 billion. Marvell Technology Group is up 54.4% since the start of the year, down 19.8% over the past year and down 17.3% over the past five years while the SPDR S&P Semiconductor ETF is up 18.8% since the the start of the year, up 14.7% over the past year and up 14.1% over the past five years.
For traders or investors who are technicians, here is a recent technical chart for Marvell Technology Group:
The Bottom Line. If you are looking for a semiconductor stock with continued upside potential, the Marvell Technology Group is definitely worth taking a closer look at verses the SPDR S&P Semiconductor ETF.
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