Written by: Aaron Katsman | June 15, 2008
Aaron Katsman
IsraelNewsletter.com
Shares of technology company Marvell Technology(MRVL), spiked on Friday as rumors swirled about a potential acquisition of the firm at a really sweet premium.
Eric Savitz wrote on the Tech Trader Daily: “Marvell shares are sharply higher this morning on rumors the company might be a takeover target, according to trading sources. The talk is that Texas Instruments (TXN) or private equity firm Silver Point Partners might make an offer; the rumored bid price is $24 a share. That would value the company at $14.4 billion. I repeat: this a rumor, of uncertain validity, so treat it accordingly.”
Not only did the stock price jump but trading in Marvell options also surged. Andrew Wilkinson wrote on SeekingAlpha.com: ” With 80,000 options already in play Marvell ranks early among the most active tickers on our platform, as calls are heavily bought in excess of open interest at the 17.50 strike in the June and July contracts. Premiums are more than 150% higher today at both these strikes.”
We have written about the turnaround taking place at Marvell, and in general we would rather see the turnaround play out, than for the company to accept a buyout offer. But in this case we are taking about a potential premium over 40%. Giddy up! Take the money and run.
Keep in mind that this is only a rumor. Investors should keep an eye on how Marvell options trade over the next few days to try and get an idea if the rumor has any legs. It wouldn’t be the first time that option traders knew something was going on and loaded up the boat for a trade.
Disclosure: Author’s fund has a position in MRVL. He has no position in any other stock mentioned as of 6/15/08.
Please see our Disclaimer HERE.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | May 30, 2008
Aaron Katsman
www.IsraelNewsletter.com
Shares in networking chip vendor Marvell Technology (MRVL) are surging on the back of a very strong earnings report. As reported by Tiernan Ray: “sales rose 27% year-over-year to $804 million in its fiscal first quarter ending May 3, beating an average estimate of $784 million. The company’s net income per diluted share of 24 cents, excluding some costs, was almost five times as high as the year-earlier period, and well ahead of estimates of 13 cents per share. Including costs for stock-based-compensation, among other things, profit was 11 cents a share. The company cited stronger than expected sales of “802.11N” wireless router chips, chips for networked disk drives, and printer chips among the sources of higher-than-expected revenue in the quarter. Cost-cutting initiatives helped Marvell boost its gross profit as a percentage of sales to 52%, above the company’s 50% target.”
As colleague Zack Miller posted in December, ” It’s definitely a stock with hair on it. But after taking a recent haircut, it may be an interesting, albeit drawn-out, play.”
How right he was. Giddy Up. It seems that the company’s ambitous turnaround plan has taken hold and we are starting to see the results. Improving margins, the aforementioned launch of the 3G Blackberry, new products and cost cutting all could possibly help the stock get back on track.
As IOI wrote a few months ago, the fact that the former hi-flyer came crahsing down to earth, potentially made for an attractive entry point for the stock. I don’t want to toot our own horn, but with Miller’s Decemeber call and our February post, it’s nice to be right once in a while!
If you are a long-term investor, looking to find a battered tech name that has the potential to make a turnaround, do some research on Marvell.
Disclosure: Author’s fund holds a position in MRVL. He has no position in any other stock mentioned as of 5/30/08.
Please see our Disclaimer HERE.
NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.
Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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Written by: Aaron Katsman | February 25, 2008
Aaron Katsman
www.IsraelNewsletter.com
Shares of Marvell Technology (MRVL) are trading higher as a story in Barron’s says that shares could double in two years as the company’s chips find their way into new products and help boost profits. Barron’s thinks that a potential catalyst for the stock will be as Research in Motion (RIMM) launches 3G BlackBerry handsets using Marvell chips.
Marvell, a fallen tech-darling, has dropped over 60% since early ‘06. Beset by problems from the options backdating scandal and falling margins, investors have totally lost confidence in the name. More than once over the last 12 months we have heard that the stock is a great buy, only to watch it fall more.
While some investors will cry that now that Barron’s wrote about them the stock is doomed, the potential for the stock to recover is very real. Improving margins, the aforementioned launch of the 3G Blackberry, new products and cost cutting all could possibly help the stock get back on track.
Some buy-side investors are betting that Marvell can earn $1.00 to $1.50 if it executes well in the fiscal year ended January 2010 (again, not counting options). Sangeeth Peruri, of J&W Seligman, thinks such earnings would return the forward-earnings multiple on the stock from today’s 16 times earnings back to the level of over 20 times that Marvell enjoyed in years past. If so, Marvell’s shares could more than double from 11 today.
“Revenues are growing, driven by a lot of product cycles,” says Peruri. “You could get 30-50% annual earnings growth for the next three-to-five years.”
Disclosure: Author’s fund holds a position in MRVL. He has no position in any other stock mentioned as of 2/25/08.
Please see our Disclaimer HERE.
NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.
Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
