After Skyrocketing 340% in Just 12 Months, Is Marvell Technology Stock Still a Good Buy?
Key Points
Marvell Technology will be one of the stocks set to join the S&P 500 later this month.
The business has been generating strong results and recently boosted its guidance.
Marvell Technology's valuation, however, is incredibly high.
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Custom chipmaker Marvell Technology (NASDAQ: MRVL) has been performing well in recent quarters, and its shares have risen by more than 340% in just the past 12 months. And with more growth still on the horizon due to artificial intelligence (AI), investors remain bullish on its long-term future.
In the near term, it may have yet another catalyst for investors to look forward to: its addition to the S&P 500. In the upcoming update to the popular index, Marvell's stock will be among the additions, joining the index as of June 22. Does that news, along with its promising growth and outlook, make the stock a no-brainer buy right now?
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Why the addition to the S&P 500 could give Marvell's stock a boost
Getting added to a key index, such as the S&P 500, is fantastic news for a stock, as it means investors will now have exposure to Marvell simply by buying index funds that track the index. That buying pressure can help lead to a higher price for Marvell's stock. It also adds credibility to the stock and may result in it appearing on the radar of more retail investors who may otherwise have been unfamiliar with it. Overall, it's a huge positive catalyst for the tech stock, which could help send its shares higher.
Meanwhile, Marvell has also been experiencing strong demand due to AI, and it recently boosted its guidance due to "exceptional AI-related bookings." For the current quarter, the company projects revenue to rise by 35%, to $2.7 billion. That's up from a 28% growth rate during the first quarter of fiscal 2027 (which ended on May 2), and it expects the rate to continue to accelerate during the fiscal year.
Investors should still, however, consider the stock's high valuation
While the growth is strong for Marvell, I don't think it's enough to warrant the stock's high price tag. Marvell's stock trades at a forward earnings multiple of 65, and that's based on the level of profit that analysts expect the business to generate in the year ahead. Even the long-term price-to-earnings-growth (PEG) multiple is around 1.50, which suggests it's not a terribly cheap stock to own; typically, a PEG of less than 1.0 is a sign of good value for growth investors.
Marvell's stock will benefit from its addition to the S&P 500 index, but that alone may not be enough for the stock to continue surging higher, given its elevated price tag; I wouldn't rush to buy it right now.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology. The Motley Fool has a disclosure policy.
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