Technology investors who missed out on the run-up in data storage stocks may consider Marvell (MRVL). While Western Digital (WDC) and Seagate (STX) are near 52-week highs, MRVL stock lost 10.5% on May 30, 2024, after posting quarterly results.
Marvell’s revenue dropped by 12.1% Y/Y to $1.16 billion. Non-GAAP EPS was $0.24. Data center revenue grew to $816 million, benefiting from strong demand for cloud AI applications. Short-term growth is limited by the company ramping up its custom AI silicon sales. Expect custom compute growth in the mid-single digit percentage.
Issues
The firm has too much debt and issues too much in stock-based compensation. Both of those attributes hurt shareholders.
Markets give Marvell the benefit of the debt because the company has a floor of $1.5 billion in AI revenue in this fiscal year. Electro-optics accounts for 2/3 of the revenue, while 1/3 is in custom.
In the cybersecurity sector, SentinelOne lost 13.3% last Friday, May 31, 2024. The firm posted a loss of 23 cents a share. Its annual recurring revenue of $38 million is too weak, hurt by a challenging macro environment.
Although the firm posted positive free cash flow for the first time this quarter, the company’s growth prospects are losing momentum.
S stock is attractive for its zero debt and 40% Y/Y growth in the last quarter.
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