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Marvell Technology will report its fiscal second quarter results on Thursday after market close. Consensus estimates point to more than 50% year-over-year earnings growth thanks to artificial intelligence demand. Despite 11%-12% adjusted EPS growth over the next year, the stock is trading at just 23x forward 12-month earnings, well below the average over the past two years. The secular backdrop for Marvell would seem to be extremely strong, as the expected capex by the hyperscalers and performance of Nvidia suggest. Why then is Marvell trading at a discounted multiple? A clue might be the stock’s post-earnings performance in recent years. The stock averages a 3.3% decline following the release of earnings. The stock has fallen in six of the last eight earnings releases (although fiscal Q3 2025 did see a remarkable 23% bounce). One thing is certain: while some of the AI trade dynamics affect demand for Marvell products, the company has not demonstrated that it has the kind of pricing power that Nvidia enjoys. Net income margins turned positive three quarters ago and grew to just over 12% last quarter. Respectable for sure, but fairly pedestrian when compared to the greater than 50% net income margins of Nvidia. Marvell, which closed Friday at $73 a share, is trading about 42% below the all-time highs of January, and ~48% above the lows of late April. An examination of the company’s post-earnings price volatility suggests low probabilities that Marvell will trade above $85 per share, or below $60 per share by September “regular way” expiration on the 19th. A trader seeking to collect some options premium might then consider selling the September 85/60 strangle. Selling the Sep $85 calls for ~$1.58 and the Sep $60 puts for $1.12 would yield $2.70 in options premium, or 3.7% of the current stock price in less than 4 weeks. That represents a “standstill yield” of more than 50% annualized. The only problem with that trade though is that, on a couple instances, Marvell has indeed significantly surprised the Street to the upside as it did when they reported fiscal Q3 25 earnings in November and fiscal Q1 24 back in May of 2023 when the stock rallied by more than 32% in a single day. The trade To mitigate the risk associated with these rare but substantial moves, one could cover the upside risk by purchasing the Sepember 90 calls for 88 cents. This would reduce the premium collected to $1.82, and therefore reduce the standstill yield to about 2.5%, but it would cover the max upside risk in the event the company delivers extraordinary results. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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