Marvell Technology, Inc. (MRVL) designs, develops, and sells analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. On the other hand, Amkor Technology, Inc. (AMKR) provides outsourced semiconductor packaging and test services in the U.S., Japan, Europe, the Middle East, Africa, and the rest of the Asia Pacific.
The chip industry has witnessed a slowdown in recent times amid declining demand and rising recession fears. Semiconductor giants like QUALCOMM Incorporated (QCOM), Intel Corporation (INTC), and Advanced Micro Devices, Inc. (AMD) have lowered their near-term projections and are on a cost-cutting spree.
However, according to Bruce Lu, an equity analyst at Goldman Sachs, “Despite the recent macro and geopolitical concerns that have resulted in the near-term demand slowdown, we believe the long-term semiconductor industry growth is still intact as driven by the increasing silicon content within end-devices.” Furthermore, the lucrative $280 billion CHIPS Act is expected to boost the domestic semiconductor sector.
Therefore, MRVL and AMKR might benefit from the industry’s growth prospects.
However, MRVL has lost 6% over the past month, while AMKR has gained 25.6%. Moreover, MRVL has lost 54.5% year-to-date, while AMKR has lost 9.2%. But which of these stocks is the better pick now? Let's find out.
Latest Developments
On November 8, 2022, MRVL announced the extension of its campus networking portfolio into the operational technology networks common to industrial and critical infrastructure organizations. This should help attract more customers.
However, on October 4, 2022, B. Riley lowered MRVL’s price target from $63.00 to $52.00.
On the other hand, on October 31, 2022, Giel Rutten, AMKR’s President and CEO, said, “Despite macroeconomic uncertainty, we remain well positioned to execute on our strategy, leveraging our leadership position in Advanced packaging and our broad geographic footprint to support the industry megatrends of 5G, IoT, Automotive, and HPC.”
Recent Financial Results
MRVL’s net revenue increased 41% year-over-year to $1.52 billion for the second quarter that ended July 30, 2022. Its net income came in at $4.30 million, compared to a loss of $276.40 million in the year-ago period, while its EPS came in at $0.01, compared to a loss per share of $0.34 in the previous period.
AMKR’s net sales increased 24% year-over-year to $2.08 billion for the third quarter that ended September 30, 2022. Its net income came in at $306.08 million, up 69.2% year-over-year, while its EPS came in at $1.24, up 67.6% year-over-year. Also, its operating income came in at $319.29 million, up 51% year-over-year.
Past and Expected Financial Performance
MRVL’s revenue increased at a 23.7% CAGR for the past three years. Its revenue increased 37.8% year-over-year to $6.15 billion in 2023 and 15.1% year-over-year to $7.08 billion in 2024. In addition, its EPS is expected to increase 46.5% year-over-year to $2.30 and 21.3% year-over-year to $2.79 in 2024.
On the other hand, AMKR’s revenue increased at a 20.4% CAGR for the past three years. Moreover, its revenue is expected to increase 14.6% year-over-year to $7.04 billion in 2022, while its EPS is expected to increase 18.9% year-over-year to $3.14 for the same period. Also, its EPS is estimated to grow 7.5% per annum for the next five years.
Profitability
MRVL’s gross profit margin of 51.66% is higher than AMKR’s 19.65%. Its EBITDA margin of 30.63% is higher than AMKR’s 22.09%. However, MRVL’s negative net income margin of 3.95% is lower than AMKR’s 11.84%, while its negative ROE of 1.44% is lower than AMKR’s 26.13%.
Valuation
In terms of forward EV/Sales, MRVL is trading at 6.08x, higher than AMKR’s 0.89x. In addition, MRVL’s forward EV/EBITDA of 14.77x is 292.8% higher than AMKR’s 3.76x. Also, MRVL’s forward P/E of 490.99x is higher than AMKR’s 6.88x.
Thus, AMKR is a relatively affordable stock here.
POWR Ratings
AMKR has an overall rating of B, equating to Buy in our proprietary POWR Ratings system. On the other hand, MRVL has an overall D rating, which translates to Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
AMKR has an A grade for Value. Its forward EV/Sales of 0.91x is 64% lower than the industry average of 2.53x, while its forward Price/Book of 1.51x is 59.2% lower than the industry average of 3.70x.
On the other hand, MRVL has a C grade for Value. Its forward Price/Book of 2.17x is 41.4% lower than the industry average, while its forward EV/Sales of 6.15x is 143.4% higher than the industry average.
AMKR has a C grade for Quality. Its trailing-12-month gross profit margin of 19.65% is 60.7% lower than the industry average of 50.04%, and its trailing-12-month net income margin of 11.84% is 208% higher than the industry average of 3.84%.
On the other hand, MRVL has a D grade for Quality. Its trailing-12-month negative net income margin of 3.95% is lower than the industry average.
Of the 91 stocks in the Semiconductor & Wireless Chip industry, AMKR is ranked #18. On the other hand, MRVL is ranked #79.
Beyond what we’ve stated above, we have also rated the stocks for Growth, Momentum, Stability, and Sentiment. Click here to view AMKR ratings. Get all MRVL ratings here.
The Winner
Semiconductor demand has slowed amid weakening demand. However, lucrative federal investments might boost the industry’s growth, boding well for AMKR and MRVL. Yet, given AMKR’s steady financials, I think it might be a better buy now.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Semiconductor & Wireless Chip industry here.
MRVL shares were trading at $37.06 per share on Wednesday afternoon, down $2.73 (-6.86%). Year-to-date, MRVL has declined -57.46%, versus a -19.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
MRVL vs. AMKR: Which Chip Stock Is Better to Buy Now? StockNews.com
