A Marvell of a Tech Stock
11/23/2009 1:00 pm EST
Louis Navellier, editor of Blue-Chip Growth, says a stronger market will continue to push technology stocks higher, and he finds one he thinks will prosper.
The global economy is indeed in recovery right now. As we turn the page on 2010, we are poised for what could be [our] most profitable run as we forge ahead into a new bull market.
Many of the challenges at the beginning of 2009 resulted in fundamental changes in the way Wall Street works. This evolution of the market has created some challenges and a few gloomy headlines, but also some incredibly exciting opportunities. Together, we will focus on these trends in 2010 as the market continues to build on its recovery.
Many investors who lost a bundle as the market crashed in late 2008 remain gun-shy even now despite the fact that the market has rallied strongly recently. The Dow is back above 10,000 and third-quarter gross domestic product (GDP) showed a preliminary growth rate that was very strong. But to hear some tell it, things are worse than ever.
Scared investors paralyzed by their previous losses are only hurting themselves by sitting out the market and waiting for a crash that will never come. Rational investors like us, however, focus on the opportunities and not the fear.
Marvell Technology Group (Nasdaq: MRVL) is a Bermuda-based firm that offers data storage and broadband communications gear. This "fabless" semiconductor company designs and sells hardware, but outsources the actual fabrication of the devices to keep down costs. Marvell is a global player, deriving more than 80% of its revenue from Asia, though it relies on just a few customers like Western Digital (NYSE: WDC), Toshiba, and Samsung for the bulk of its sales traffic.
MRVL is a great tech stock for 2010 since it's at the forefront of the growing electronic book market. As we've seen with the recent success of Amazon.com (Nasdaq: AMZN) though its Kindle, e-books are rapidly emerging as mainstream products and real sources of revenue for tech companies.
Marvell recently announced that it is collaborating with E Ink Corp., which is supplier of "e-paper" displays used in many digital-book readers, to produce the next generation of microchips for these e-book devices. Jack Kang, a Marvell director of technical marketing, estimated that by integrating chips that they can cut the cost of processors in half—meaning [that] manufacturers will jump all over Marvell's new processors once they hit the market.
What's more, the numbers show that Marvell is going strong already even without this potential revenue stream. The company recently raised its sales outlook for the third quarter to between $760 million [and] $775 million (up from its previous outlook of $680 million to $730 million), citing higher consumer demand. In the past three months, [analysts have] revised their consensus earnings estimate 50.9% higher, which bodes especially well for its future earnings outlook. This stock is going strong and should continue its impressive growth across the next year. (It closed above $15 Friday—Editor.)