A Marvell of a Stock

01/19/2010 2:32 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Marvell Technology Group (Nasdaq: MRVL) is in the right markets at the right time. (For more on what those markets are, see today’s edition of Jubak’s Journal.)

Storage has always been the company’s core business—and it still makes up about 50% of its revenues. That’s projected as a hot sector in fiscal 2011 (the company’s 2011 fiscal year begins with the April quarter), with revenue growth for the company forecast at 18% year over year by Kaufman Brothers. That’s above projected 12% to 15% growth in PC units sold for 2010, a result of the company’s continued gains in market share.

But as good as prospects for that business are, it’s the likely growth in sales of embedded chips to the producers of consumer products from cell phone handsets to e-books and netbooks that make the stock a buy now. (Marvell acquired Intel’s communications and application processor business for $600 million in cash in November 2006.)

The company’s new Armada family of ART-based processors for smartphones, smart books, embedded devices, and displays is just starting to contribute to growth. In fiscal 2011, Kaufman Brothers projects that revenue in the mobile/wireless unit will grow by more than 20%.

The Wall Street consensus projects that Marvell’s earnings will climb 45% to $1.09 a share in fiscal 2011. I think that’s likely to be low, but in any case, the consensus estimate says the stock is now trading at 18.4x fiscal 2011 earnings per share. As of January 19, 2010, I’m adding Marvell Technology Group to Jubak’s Picks with a target price of $26 a share by December 2010.

See the complete Jubak Picks Portfolio here.

Full disclosure: I will buy shares of Marvell Technology Group for my personal portfolio three days after this is posted.

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