In the first half of this year, one of the obvious winners among large-cap technology stocks was Marvell Technology (MRVL). Coming off a 45% gain last month, the semiconductor stock is now up more than 250% year-to-date.
That’s a massive move in a short timeframe, implying the stock and the Direxion Daily MRVL Bull 2X ETF (MRVU) may be due for breathers, but there are reasons to believe this high-flying tech name can extend its bullish ways in the second half of the year. If that outlook is validated, traders will have plenty of opportunities to embrace MRVU. This fund attempts to deliver 200% of the daily performance of the chip stock.
To its credit, Marvell ended June on a strong note. MRVU pushed higher on the final trading day of the month. This was after UBS lifted its price target on the stock to $340 from $230. It cited potential for expanded revenue on the data center front.
More Marvell Catalysts
Amazon’s (AMZN) artificial intelligence (AI) semiconductor plans may also be indicative of MRVU opportunity.
“The most likely driver is renewed enthusiasm around custom AI silicon after Amazon explored selling its Trainium chips to outside customers, which investors appear to view as a positive read-through for Marvell’s design and connectivity business,” according to Quiver Quantitative. “Marvell is deeply tied to hyperscale AI infrastructure, so any sign that the custom-chip market is expanding can lift expectations for future demand.”
Prospective MRVU traders should monitor potential evolution in Marvell’s customer base. The company’s products are clearly in demand, but it remains highly dependent on a small number of customers. Any broadening of that client roll could be a second half catalyst for the stock and MRVU, assuming that situation materializes.
“With three customers representing 75% of gross accounts receivable and a target to grow custom silicon revenue to over $10 billion by FY29, Marvell’s growth trajectory is tied to the strategic decisions of a handful of hyperscalers, creating massive upside if execution holds but existential risk if any major customer pivots to in-house solutions,” noted EveryTicker.
Looking further, Marvell’s next quarterly earnings update is estimated to arrive on Aug. 27, providing opportunity for short-term traders to consider MRVU. One factor to watch for will be margin improvement comparable to or in excess of reporting in the first quarter.
“Gross margin expanded 1.8 percentage points year-over-year to 51.5% (GAAP) and 58.25-59.25% on a non-GAAP basis. This improvement demonstrates pricing power in AI-related products and better cost absorption at higher volumes,” added EveryTicker.
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