Investing.com — TD Cowen and Bank of America both downgraded Marvell Technology on Tuesday, citing concerns about the chipmaker’s acquisition of Lumentum.
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TD Cowen downgraded Marvell from Hold to Buy and reduced its price target from $350 to $175. Analyst Sean O’Loughlin expects the deal to dilute EPS by a mid-single-digit percentage in 2028, its first year, and worries it could reach or near the top of a mini-optical cycle.
“Our downgrade is primarily driven by our negative view of the transaction itself in terms of structure and timing, rather than the quality of the asset Marvell is acquiring,” O’Loughlin wrote.
He said Lumentum is likely to become a “crown jewel” within Marvell’s portfolio. However, he noted that the bottom-up consensus implies an optical transceiver market of around $100 billion in 2027, compared to TD Cowen’s forecast of $47 billion. If the cycle reverses, Lumentum’s operating leverage could worsen the dilution.
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Bank of America lowered Marvell’s rating from Buy to Neutral and reduced its price target from $400 to $225. Analyst Vivek Arya cited a potential prolonged inventory surplus resulting from the deal, as well as a 19% drop in the SOX index over the past month.
BofA said the deal has strategic merit because it creates a broader electrical-optical connectivity platform.
However, it flagged a lengthy regulatory process, with an expected closing in the first half of 2028, limited EPS growth as $1 billion in cost reductions are not enough to offset roughly 50% stock dilution, and potential conflicts with customers.
“There was no mention of any significant M&A at MRVL’s recent analyst day, so the news comes as a considerable surprise,” Arya said. “We question the impact on LITE’s valuation once laser shortages are inevitably resolved.”
Original article
Analysts Downgrade Marvell, Cut Price Targets Following Lumentum Deal
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