Cantor Fitzgerald Downgrades Marvell's Rating and Price Target: Outlook for Custom Silicon Business Deteriorates, Resulting in Loss of Amazon and Microsoft Orders.

May 7, 2025, Cantor Fitzgerald downgraded Marvell Technology's stock rating from "Outperform" to "Neutral," and lowered the price target from $125 to $60 per share, due to growing market concerns about the prospects of its custom silicon business, especially due to the loss of orders from Amazon and Microsoft. Cantor forecasts that earnings per share will drop to $3.00 by 2027, which is below expectations and further undermines valuation support.

Rating Downgrade and Significant Target Price Revision

In its latest report, Cantor Fitzgerald noted that Marvell's customized silicon business is facing significant challenges, primarily due to customer attrition and declining product appeal. The firm downgraded Marvell's stock rating from "Overweight" to "Neutral" and slashed the target price from $125 to $60, reflecting a significant weakening of confidence in its future revenue and profitability.

The report pointed out that although Marvell's stock price has significantly retreated from its January 2025 peak, the market may have partially reflected the impact of losing the Amazon Trainium Gen3 order, but has not fully absorbed the potential impact of possibly losing the Microsoft Maia Gen3 (codenamed Griffin) design project.

Key Customer Shifts: Movements of Amazon and Microsoft

According to Cantor's industry survey, Microsoft (NASDAQ: MSFT) plans to transfer the production of its Maia Gen3 chips to Broadcom (NASDAQ: AVGO) starting in 2027, while Amazon (NASDAQ: AMZN) may shift part of its Trainium chip design to Taiwan's Alchip. These shifts indicate that Marvell's competitiveness and customer retention in the customized silicon market are below expectations.

Cantor bluntly stated in the report: "This reflects the declining appeal of Marvell's customized silicon solutions, with customer retention lower than we initially expected."

2027 Earnings Per Share Expectations Revised Down to $3

Although Cantor expects Marvell to maintain steady customized silicon revenue growth between 2025 and 2026, the earnings outlook for 2027 appears pessimistic. The firm estimates that Marvell's earnings per share in 2027 will decline to $3.00, significantly lower than previous forecasts, and this downward revision is a major basis for the substantial target price cut.

The report noted that unless there is clear progress in securing new medium to large customer orders, it will be difficult to support a higher price-to-earnings ratio. This also means that Marvell's future valuation will face greater pressure.

Investor Day Postponement and Market Confidence Shaken

Further shaking market confidence is the postponement of Marvell's originally scheduled Investor Day event on June 10, 2025, to 2026, replaced only by an online briefing focused on customized silicon. Cantor believes this delay weakens potential positive catalysts in the short term and noted that "potential catalysts will be quite scarce in the short to medium term."

Additionally, Marvell recently narrowed its revenue guidance range for the first quarter of fiscal 2026 from ±5% to ±2%, maintaining the median forecast at $1.875 billion, but indicating increased uncertainty about future operations.

Stock Price and Financial Performance Under Pressure

As of May 7, Marvell's stock price has fallen over 50% year-to-date, significantly lagging behind the S&P 500 index, which has only declined 4.6% over the same period. The company's current stock price is approximately $54.51, a significant drop from the year's high.

Financially, Marvell recorded a net loss of $885 million over the past 12 months, with a net margin of -15.3%, a return on equity (ROE) of -6.3%, and diluted earnings per share of -$1.02. Nevertheless, the company still holds $948 million in cash and $1.69 billion in leveraged free cash flow, with a debt ratio of 32.4%, indicating a relatively stable financial structure.

Declining Appeal of Customized Silicon Business

Marvell was originally seen as a key player in the AI customized chip market, alongside competitors like Nvidia and Broadcom. However, as tech giants like Amazon and Microsoft turn to other suppliers, Marvell's customized silicon business is facing challenges due to declining appeal.

Cantor noted that these shifts not only affect short-term revenue but also reflect Marvell's disadvantages in design and customer relationship management. The report mentioned: "We initially believed Marvell's customized silicon business had higher customer retention, but the actual situation shows that this assumption was overly optimistic."

Cantor Fitzgerald Downgrades Marvell's Rating and Price Target: Outlook for Custom Silicon Business Deteriorates, Resulting in Loss of Amazon and Microsoft Orders.

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