Marvell Review: we invest in data centers and suffer losses

Обзор Marvell: инвестируем в дата-центры и терпим убытки

Marvell Technology (NASDAQ: MRVL) - American semiconductor manufacturer. The company is considered very promising, and therefore its price is overpriced. But huge debt and losses raise doubts about the validity of its current price..

When creating the material, sources were used, inaccessible to users from the Russian Federation. Hopefully, you know, what to do.

What do they make money on

According to the company's annual report, its proceeds are distributed as follows:

  1. Network operation - 57%. Controllers, adapters, processors and other equipment, necessary for the operation of computing devices.
  2. Data storage - 39%. Everything, what you need for hard drives and servers. In fact, the segment works for data centers.
  3. Other - 4%. Mainly server components.

By country, the company's revenue is distributed as follows:

  1. China - 43%;
  2. USA - 11%;
  3. Malaysia - 9%;
  4. Thailand - 8%;
  5. Philippines - 6%;
  6. Japan - 5%;
  7. Other unnamed countries - 18%.

Direct sales to tech companies generate 75% Marvell Technology revenue, 25% accounted for by intermediaries. At the moment the company is unprofitable.

Обзор Marvell: инвестируем в дата-центры и терпим убытки

Arguments in favor of the company

"It was the best of all time". There is a large shortage of semiconductors in the world: chips are needed by everyone and everywhere, and in sufficient quantities they are nowhere to be found. This allows manufacturing companies to raise prices.. So for the next couple of years, Marvell may well expect to see revenue growth..

Something about the clouds. More than a third of the company's revenue actually comes from cloud computing and data centers. This sector will continue to grow for a long time., and, let's face it, Marvell's focus on the development of this segment partly explains the inflatedness of its quotes. And data centers are, certainly, positive point for those, who plans to invest in a company with an eye to the long term.

Обзор Marvell: инвестируем в дата-центры и терпим убытки

Обзор Marvell: инвестируем в дата-центры и терпим убытки

Chip demand by industry, billion dollars

Computer Computing 160,2
Wireless technology 126,7
Industry 41,6
Automotive 39,5
Consumer technology 60,1
Communication infrastructure 36,3


What can get in the way

"It was the worst of all time". The company is unprofitable for two reasons:

  1. She constantly invests in the expansion and modernization of her business.. Recently, eg, she bought Innovium for $ 1.1 billion.
  2. Her costs are going up a lot, what is the flip side of the rush demand for semiconductors: prices are now being raised by everyone.
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There is no reason to count, that something will change here in the near future. Therefore, one can only hope for, that the company's revenue will grow faster than spending - and due to this, Marvell will still make a profit during our lifetime.

Concentration. According to the company's annual report, 13% its revenue comes from a small company Wintech. Sudden change in relationship with Wintech could negatively impact Marvell reporting, so this must be borne in mind.

Dividends. The company pays 24 cent of dividends per share per year - almost 0,4% annual. The company spends about $ 198 million a year on payments, which is more than all her profits. More precisely, she had no profit this year, now she works at a loss. Payments should cut for at least this reason - although that would be enough, that the company spends a lot on business expansion. On the other hand, it is unlikely that Marvell quotes will suffer from the exodus of dividend investors in case of cut payments.

Money from the bedside table. The company is unprofitable and at the same time burdened with large debts, the amount of which is $ 6.097 billion, of which 1.084 billion needs to be paid off within a year. She has enough money at her disposal to close urgent debts., but in general, the increase in its debt burden cannot but worry on the eve of an increase in interest rates and a rise in the cost of loans.

Moreover, with the current trends in the development of the company and its focus on expanding its business, I would expect, that the debt burden on the company will increase, - this will certainly annoy investors.

Competitors. The problem with the company's competitors is not at all, that they actively influence the pricing policy of Marvell, - in conditions of insane demand for semiconductors with a lack of supply, there will be enough money for everyone. The thing is, what Marvell looks like compared to competitors expensive.

for example, Marvell's earnings-per-share ratio metric is 13,52. And for NXP, this indicator is at the level 5,81, у Broadcom — 7,88, in Microchip - 7,37, у Silicon Motion Technology — 3,62.

clear, that investors gave Marvell big credit, because she develops a direction with data centers, which is considered extremely promising. But still, even in this context, Marvell looks prohibitively expensive.. Including because, that the benefits from this direction are not yet strongly manifested, the company is still unprofitable.

  about good investments

Big Trouble in Little China. The Evergrande story could end in a massive recession in the PRC - and, Consequently, lead to a weakening of business activity throughout Asia. This could be a problem for Marvell, since she receives the main money in China and other Asian countries. Or maybe not. Marvell supplies Chinese contractors to American companies - total buyers of products, created from Marvell components, for the most part are not in China. But anything can be.

Cost of materials, parts and processes in the production chain for chips by type, percentage increase compared to August 2020

Display driver integrated circuit To 50%
Copper 40%
Services of common contract chip manufacturers 30—40%
Chips for microcontrollers 30—40%, in exceptional cases until 400%
Power Management Chips 30—40%, in exceptional cases until 500%
Framework 25—30%, more than 200% for individual specifications
Layer for connecting processor components 20—30%
Chip packing services 15—20%
High quality contract chip manufacturers services 8—10%
Plate materials 5%

To 50%

What's next

In my opinion, the cons of the company outweigh the pros. Therefore, I would not take these shares at the current price.. On the other hand, correction here may not happen: The hype around semiconductors and data centers will stimulate investor interest in these shares. So you can invest here - but at your own peril and risk.

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