00:00 Marvel Technology is a fabulous semiconductor company that creates products used in data
00:04 centers, enterprise servers, the internet of things, smartphones and storage systems.
00:10 The company went public in 2000 and until 2018 the return to shareholders excluding
00:15 dividends was only 10%, that's significantly worse than the S&P 500.
00:21 Since 2019 however the stock has taken off, gaining 300% and that's because Marvel is
00:26 directly benefiting from the boom in data centers and artificial intelligence.
00:31 This can be seen in top line revenue which grew 50% in 2021 and another 33% last year.
00:38 At the current share price Marvel has a market cap of $52 billion.
00:42 It's got $1 billion in cash and $3.2 billion of debt so the enterprise value is around
00:47 $54 billion.
00:48 Revenue over the last 12 months is $5.8 billion with $1 billion in free cash flow but net
00:53 income is negative at -$167 million.
00:57 That means Marvel's stock is valued just over 9 times revenue and 54 times free cash
01:02 flow.
01:03 Meanwhile, the company pays a dividend of 0.41% and has gross margins just over 48%.
01:09 If we look at the company's revenue mix you can see that Marvel derives 38% of revenue
01:14 from data centers, 25% from enterprise networking, 19% from carriers, 11% from consumer products
01:21 and 7% from automotive and industrial.
01:24 There's no doubt there are some fast growing markets in there and Marvel has benefited
01:28 from the recent boom in AI stocks.
01:31 However Marvel's exposure to AI isn't as large as you might think, at least not yet.
01:36 The company estimates its AI revenue to be only $200 million in 2023 which is less than
01:42 4% of total revenue.
01:44 And although the company thinks that it will grow to $800 million by 2025, there are no
01:48 shortage of semiconductor companies that will be competing for that same business.
01:53 Meanwhile Marvel's growth in AI may be balanced out by a slowdown in Marvel's wired communications
01:58 products.
02:00 Wired networking products are showing signs of terminal decline and those products make
02:04 up a large part of Marvel's revenue.
02:06 As well, the move into GPU based servers for AI could hurt demand for Marvel's CPU connectivity
02:12 ports.
02:14 As noted by Herb Greenberg on Twitter, Marvel barely mentioned AI in its conference calls
02:19 until the first quarter of 2023.
02:21 Now it's trying to cash in on the boom.
02:24 Overall there are no shortage of competitors in this space and the semiconductor industry
02:28 will remain a tough environment, driven by cycles.
02:32 The AI boom is huge but I think there are better positioned companies than Marvel Technology.
02:37 That's why I give the stock a neutral rating but these are my personal opinions, not financial
02:41 advice and I've got no position in the stock.
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