We're Buying This Deeply Oversold Chip Stock After $2.5 Billion News
Exiting a business brings this holding ample cash that it can put to work.
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| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
MRVL | Buy | 255 | $53.25 | 2,460 | 3.2% |
After you receive this alert, the Portfolio will buy 255 shares of Marvell MRVL at or near $53.25. Following the trade, the Portfolio will own 2,460 MRVL shares, roughly 3.2% of its assets.
While the stock market is bouncing from extremely oversold levels, we also recognize that much uncertainty remains, especially with the start of Trump’s reciprocal tariffs on Wednesday, China’s retaliatory response, Trump’s threat to boost tariffs on China and the pending tariff response from the European Union. However, we have a very specific catalyst that is leading us to take advantage of the deeply oversold condition in Marvell shares today.
On Tuesday night, it was announced that Infineon IFNNY agreed to purchase Marvell’s automotive ethernet business that is expected to generate $225 million to $250 million in sales this year for $2.5 billion. Given the $322 million in revenue reported in 2024 from its Automotive/Industrial segment, it’s a pretty safe bet that this is the bulk of Marvell’s automotive business.
To be blunt, with the combined Automotive/Industrial business driving about 5% of total revenue, the sale makes for a cleaner story for the company. Given the size of the remaining industrial business, we would not be surprised to see Marvell exit that down the road.
The $2.5 billion in proceeds for the sale builds on the $948 million in cash Marvell had on its books as of February 1. During the same quarter, Marvell’s board authorized an additional $3 billion to its stock repurchase program. Looking back over the company’s recent 10-K filing, we see that even when the stock price was significantly higher in December and January, Marvell was buying back stock at an average price near $116.50. With the stock significantly lower, we would not be surprised to see the company again buying stock and potentially re-arming its buyback program with the proceeds from the automotive sale.
We’ll get more insight into the sale, including how it will impact Marvell’s cost structure, when it reports its quarterly results on May 29.
While today's move means MRVL shares won't be as small of a position as they were before, we still have room to add some additional shares down the line. Catalysts between now and the company's May 29 earnings report we will be watching include quarterly results from Taiwan Semiconductor TSM and Foxconn FXCOF, as well as comments about AI adoption from software companies like ServiceNow NOW as they report their quarterly results.
Our Shopping List
On Monday, we shared other holdings on our shopping list include Axon Enterprise AXON, Palantir PLTR, Elastic ESTC, Meta META and Dutch Bros BROS.
That remains the case, but we will want to at least get through the next few days and any new tariff developments they bring before making any small buys. Remember, we still have the initial days of the March quarter earnings season ahead, and what they bring is likely to keep the market volatile. We will want to pick our spots carefully.
More Pro Portfolio
- We're Exiting This Semi-Cap Holding on Excess Capacity Concerns
- Weekly Roundup: Tariff Repercussions Roil the Market With More Uncertainty Ahead
- AI Chat Bots Are Your New Travel Agent, GenZ Can't Get a Break, and More Investing News
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long MRVL, NOW, AXON, PLTR, ESTC, META and BROS.
