What Happened:
Shares of networking chips designer Marvell Technology (NASDAQ: MRVL) jumped 6.41% in the mid-day session after competitor, Nvidia, delivered an exceptional quarter that topped analysts' estimates across key metrics. Revenue surpassed expectations by an impressive 10.3%, driven by a record-breaking data center revenue of $4.28 billion. Notably, the company exhibited improved profitability, with both gross margin and operating margin outperforming expectations. Earnings per share beat by an impressive 18.8%. Inventory levels experienced a meaningful decrease during the quarter. In addition to the outstanding quarterly results, the revenue guidance for the next quarter surpassed expectations by over 50%. Similarly, the operating profit guidance exceeded Consensus estimates. Founder and CEO Jensen Huang emphasized the ongoing transformations in the computer industry, particularly the advancements in accelerated computing and generative AI. He highlighted Nvidia's readiness to seize the opportunities presented by the anticipated trillion-dollar shift in global data center infrastructure from general-purpose to accelerated computing, as firms implement generative AI into their business operations. Overall, the company's blowout quarter, with its impressive revenue growth, enhanced profitability, and positive guidance, underscored its strength in the market. Marvell is a semiconductor company, and considered a peer of Nvidia.
What is the market telling us:
Marvell Technology's shares are very volatile and over the last year have had 34 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about two months ago, when the company gained 5.19% on the news that memory chipmaker, Micron, reported earnings. While the results trailed the consensus estimates for revenue and operating profits, Wall Street analysts noted that the semiconductor company had faced a steeper slump than anticipated, but signs of a rebound are emerging. The outlook from the company was optimistic, with Sanjay Mehrotra, the chief executive, affirming his "confidence" in the long-term demand scenario and envisaging "gradual improvements" in the industry's supply-demand equation. The stock reaction suggested that the market puts more weight on longer-term risk/reward than near-term cyclical results.
Marvell Technology is up 34.9% since the beginning of the year, but at $48.57 per share it is still trading 20.9% below its 52-week high of $61.43 from June 2022. Investors who bought $1,000 worth of Marvell Technology's shares 5 years ago would now be looking at an investment worth $2,160.
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