Marvell announces new $5 billion buyback Is the stock worth buying after a 30% collapse?

Shares of AI chip maker Marvell Technology rose 7% after the announcement of a new $5 billion buyback and an accelerated buyout of another $1 billion. The market took this as a signal of management's confidence in the business and its bet on infrastructure for artificial intelligence. The company's papers remain extremely volatile: they have lost about 30% since the beginning of the year. Nevertheless, most analysts recommend investors to buy them.

Marvell Technology shares rose 7.3% in trading on September 24 as the artificial intelligence chip maker expanded its buyback program.

The company's board of directors approved a new $5 billion buyback. Marvell has already committed $3 billion to the buyback in March 2024 and, according to the latest data, it has $1.7 billion left unused. In addition, Marvell has entered into an agreement with an unnamed major financial institution for an accelerated share repurchase of another $1 billion. The deal is expected to go through as early as September 25.

"This agreement reflects our confidence in the business and intrinsic shareholder value as we continue to deliver solid revenue and cash flow growth," said CEO and Chairman Matt Murphy.

The share buyback complements the company's course of returning capital to investors, StockStory notes . Such moves signal that management believes the securities are a good investment and is confident in the future growth of the business. Murphy says the strong balance sheet allows the company to continue to make long-term investments, especially in the expanding AI infrastructure market.

Since the beginning of the year, Marvell shares have lost about 30%, lagging behind competitors like Broadcom, Barron's writes. However, in September, the securities significantly recovered the fall: growth was noted in eight of the last nine sessions, and for the month quotes added 23%, according to Dow Jones Market Data. Against the background of high volatility, the growth of shares on September 24 is perceived by the market as significant, but not radically changing the assessment of the business, explains StockStory.

The reasons for the September rally are not yet clear: other chip companies show heterogeneous results. Nevertheless, analysts expected a recovery. According to FactSet, 34 out of 41 experts recommend buying Marvell shares or give a similar rating, Barron's notes. The average target price is $88.2, implying upside potential of about 11% from current levels, according to TipRanks.

Five analysts have had their say on the company in the past month, with JP Morgan, Needham, Barclays and Wells Fargo reiterating Buy and Overweight ratings on the company, while BofA Securities went against the trend and downgraded it to Neutral, StockStory writes.

Along with Broadcom, Marvell makes application-specific integrated circuits (ASICs), which are considered an alternative to Nvidia and AMD graphics processors, MarketWatch clarifies .

ASICs have their pros and cons compared to GPUs (Graphics Processing Unit, a graphics processor designed to process graphics and visualize images), but large technology corporations are actively interested in such solutions, seeking their own custom chips. For example, Marvell is working with Amazon on the Trainium chip.

Users see custom chips not only as an opportunity to reduce dependence on Nvidia, but also as a solution for specific AI training and inference tasks, as well as a way to reduce costs, the publication emphasizes.

This article was AI-translated and verified by a human editor