Marvell's (MRVL) Q4 earnings call boosted confidence in artificial intelligence connectivity, potential for success in the impending Microsoft (MSFT) custom chip program, and progress through Amazon's (AMZN) X processing unit transition year, BofA Securities said Friday.
BofA said its out-year estimates are increasing meaningfully after a long time, with fiscal 2027 and 2028 sales rising by 8% and 12% and earnings per share higher by 15% and 12% to $3.82 and $5.43, respectively.
The firm said its calendar-year 2027 and 2028 estimates of $2 billion and $4 billion for Marvell's custom chip program offer strong upside potential compared with the hundreds of billions in capital expenditure at large XPU customers, although some volatility is expected.
Marvell's intellectual property across central processing units, networking, optical, memory and security indicates a compound annual growth rate of over 100% for the XPU "attach" program to more than $3 billion. Its market capitalization and GAAP profits could also lead to index inclusion, the brokerage said.
Despite a strong sales and EPS CAGR outlook of over 30%, Marvell's free cash flow margin of about 20% to 25% remains well under high-growth AI peers trading at similar valuations, BofA added.
BofA upgraded Marvell to buy from neutral and raised its price target to $110 from $90.
Shares of the company rose 18% in Friday trading.
Price: 89.41, Change: +13.73, Percent Change: +18.14
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