MRVL Stock Price Target Slashed In Half: ‘Material Headwinds’ After Lumentum Deal, TD Cowen Says In Downgrade

• TD Cowen’s downgrade comes after Marvell announced its acquisition of Lumentum.
• The firm said the deal could dilute earnings in its first year and questioned its timing given market cycles.
• It added that while the strategic rationale makes “some sense,” MRVL stock is unlikely to “work” in the near or medium term.

Marvell (MRVL) shares were on track to rebound on Tuesday morning after a double-digit dip in the previous session, but TD Cowen sees "material headwinds” for the stock after its acquisition of Lumentum (LITE).

The firm downgraded the stock to ‘Hold’ from ‘Buy’ and slashed its price target on Marvell by 50% to $175, down from $350. It said that the Marvell-Lumentum deal is likely to dilute earnings in the first year and doesn’t think it was well-timed given market cycles. 

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The strategic rationale "makes some sense, but we don't think the stock is likely to 'work' near- or medium-term," the firm said in a note to investors cited by TheFly.

MRVL, LITE Shares Rebound After Sharp Selloff

MRVL stock rose around 3% in pre-market trade. On Stocktwits, retail sentiment around the company trended in ‘bullish’ territory over the past day, and chatter rose to ‘extremely high’ from ‘high’ levels. Platform data showed an over 2,000% surge in message volume.

The rebound follows the stock's drop to three-month lows after a 12% dip in the previous session.

LITE stock also gained in pre-market trading, up around 2.2%, after an 18.5% drop in the previous session. Retail sentiment around the shares on Stocktwits trended in ‘extremely bullish’ territory over the past day, and chatter rose to ‘extremely high’ from ‘high’ levels. Platform data showed an increase of over 7,200% in message volume over the last 24 hours.

Retail Traders Debate Deal Risks, Opportunities

Retail commentary reflected differing views on the acquisition and the stocks’ sharp declines. One trader argued that Lumentum canceling the deal would be a more positive signal than proceeding.

Others pushed back against the negative reaction, saying it could open opportunities for Marvell and expressing confidence in the company’s prospects.

MRVL stock has nearly doubled year-to-date, while LITE stock is up over 75%.

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