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Hawk’s Nest

Marvell Tech Call Buyers Catch Massive Q4 Move to New Highs

by | Dec 30, 2021

Marvell Tech (MRVL) has been a top performer in Q4 with shares surging to record highs as investors are starting to finally better recognize this multi-year transformation story and re-rate shares higher. We detailed this back on 10/20 highlighting the positioning in February and March calls which is the timeframe we like to see for the strongest signals and have seen the action continue ever since with multiple rolls, adjusting up and out along the way. The February calls have quadrupled and continue to hold as have the March calls which have quintupled.

Following options action can be very lucrative although we have shown that buying calls still has a relatively low win-rate of around 25% so it is important to have your own trading plan which is why we curate each day that sees 300-500 notable flows into a couple that stand out and then overlay it with our formula of high-quality fundamentals, relative strength and upward trending stocks, and a catalyst for the move.

The 10/20 post was as follows:

Marvell Tech (MRVL) bullish flow on 10/19 with buyers of 3,000 December $70 calls for $2.65, 2,500 February $67.50 calls around $5.20 to $5.50, and 2,350 March $75 OTM calls for $3.40. MRVL has seen a turn in bull flow recently including buyers in the January $80 calls and November 5th (W) $67 calls. Shares have steadily risen since the May lows and starting to move out of a bull flag above monthly value this week with a short-term measured target of $72.50. The bigger move off the 2020 lows has an upside target to $80. The $55.57B company trades 35.17X earnings, 16X sales, and 100X cash with a small yield. MRVL sees 44% revenue growth in 2022 and 22% in 2023 with EBITDA more than doubling in two years. MRVL hosted an analyst day recently and highlighted a significant long-term shift away from consumer products and into more data infrastructure which represents 85% of their mix today and up from 38% in 2016. MRVL has added significant capacity through deals, most notably their $10B buy of Inphi which expanded their scale on the infrastructure side and accelerated new opportunities in 5G. Analysts have an average target for shares of $75 with a Street High $100. Craig Hallum upgrading to Buy on 10/7 citing strength in leading growth markets including cloud datacenters, 5G and automotive. The firm believes Marvell is positioned to remain one of the strongest growing companies of meaningful scale in the semiconductor space. Jefferies with an $82 PT as they think the company has expanded their TAM by $5B+ with expansion into autonomous compute processors. Hedge fund ownership rose 16.5% last quarter. Jericho Capital and Polar Capital both big buyers of stock.”