Marvell Technology Group Ltd. (MRVL) provides investors with a long-term investment opportunity as the stock has declined 60% in price over the past three years and the company continues investing heavily in research and development, with a potential to overcome investor concerns about patents and margins, says Daniel G. Lysik, Founder and Managing Director at Pratt Capital, LLC.
“Rarely do you see an innovation leader with annual research and development spending be more than 40% of their current market price, in essence providing investors with a free call option on the company’s future innovation. Marvell’s current market price, ex cash and investments, is less than three times its normalized earnings power, providing, in our opinion, a wonderful long-term opportunity,” Lysik said.
The stock’s precipitous fall can be attributed partly to investor concerns about MRVL‘s wireless segment, patent challenges and pressure on operating margins from margin compression and its incremental R&D spending, Lysik says. This wireless, storage and networking semiconductor company, however, continues managing to keep its clean balance sheet clean.
“Marvell is an industry-leading innovator, spending nearly 30% of its revenue on research and development. The company has a pristine balance sheet, no debt, and cash and long-term investments in excess of $2 billion or nearly $4 per share. More than 40% of the current market price is the cash and investments on the balance sheet,” Lysik said.
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