Marvell (MRVL) is looking MARVELOUS!
Marvell Technology (MRVL) is one of the companies that have recently been dragged down due to options expensing practices. Stock options are intended to award employees and executives through equity. However, some companies have taken advantage of this and decided to back date the options price in order to entice key employees or execs. Albeit the practice of back dating is illegal, some companies have decided to look the other way. Now that company must expense stock option in the earning reports, the SEC and the Justice Dept. are now starting to look at these practices with a microscope. Even the most respected names such as Apple Inc, is not immune to this error in judgment. The problem is prevalent amongst Silicon Valley companies.
Marvell, once a high flying stock, has lost almost 50% of its value since the news broke. Until this issue is resolved, the stock will have difficulty recovering. However, looking at the business side, the company appears to be doing quite well. Marvell still holds the dominant position in their market space. The semiconductors industry continues to fair well. In recent weeks, the stock has been moving on rumors of leverage buyouts (LBO). While this stock is trading purely on speculation, there are reasons the stock is attractive. The business is doing well, fundamental is strong, there are interest buyers, and the company is working to resolve their accounting issues. Once some of these problems are addressed, the stock should be trading in the high $20 range. In our view, at around $17/share, MRVL is a good buy.
