Marvell Technology Group Ltd. (NASDAQ:MRVL) — Shares of MRVL stock hit a new 52-week high on Monday as takeover rumors persisted. Shares have been on a tear lately, including a 14% one-day jump in mid-July following the company’s fiscal Q4 earnings report after an audit investigation was completed. While the Bermuda-based fabless semiconductor maker’s profits fell 56% year over year, they came in 2 cents ahead of expectations at 11 cents per share.
Investors and analysts also seem to be cheered by the shakeup in management. Capital IQ Equity Research, which rates MRVL stock a “Buy” with a 12-month target of $13, notes that new management is expected to accelerate cost-cutting measures to improve margins.
While revenues have declined recently, Marvell Technology’s cash flow is healthy enough to continue to repurchase shares and pay its dividend. The company pays a quarterly dividend of 6 cents per share for a current forward annual yield of 1.9%.
Turning to the chart, following a double-top at about $16.70 in March 2015 (not shown), MRVL stock plummeted to a low at $7.40 in January of this year. There it triggered a buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), and began a climb to over $10 in April.
From April to mid-July, MRVL stock consolidated, supported by its 200-day moving average. On July 20, shares reversed up, accompanied by a high-volume breakaway gap. This was followed by a new consolidation within a descending right triangle with support at about $11.30.
On Thursday, MRVL stock broke from the triangle (pennant) on higher-than-normal volume, triggering a fresh buy signal from the MACD indicator. In fact, above-average accumulation has accompanied each move higher since the mid-July breakout.
Traders should buy MRVL stock at $12.50 with a target of $14.50 for a potential return of 16%.
