Friday, May 30, 2008

Marvell Reality Tops Goldman Downgrade

Earlier this week an analyst at Goldman Sachs downgraded Marvell Technologies (MRVL). The stock price dropped about 3%.

Yesterday Marvell announced its results for the quarter that ended May 3, 2008. At the analyst conference (See my summary) Marvell executives appeared very confident and had no trouble explaining why they were doing so well and expect to do well going forward. Today a bunch of firms upgraded Marvell and its stock jumped to over $17 per share.

All of this was reasonably foreseeable, as I can prove by directing you to my past articles at my main Marvell Technologies page.

Of course, reality sometimes turns the best analysis about the future wrong. Marvell has all the risks associated with the semiconductor industry.

Rather than re-analyse Marvell when my prior analysis is holding up pretty well, let's look at that Goldman Sachs downgrade. Maybe the guy was just wrong. Several analysts seemed to have bought into the idea that Marvell's position as the market share leader in the hard-drive controller chip industry is threatened by competitors. But it seems the competition is literally blowing hot air; their chips produce three times the heat as Marvell's, so only fools use them.

Sometimes a firm has advanced news of an event with market impact. Simple guys would just buy or sell on the news. But smart guys with a lot of money and political protection can issue an upgrade or downgrade, then buy or sell the stock at a better price and make even larger profits on the advanced information.

Don't think it has never happened, or won't happen again. In any case it is nice to see people who think upgrades and downgrades mean automatic profits get slaughtered once in a while.

Best to do your own analysis. And stay diversified!

See also

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