(MANGO): Semiconductor Stocks
Diving deep into a new acronym used to describe top semiconductor stocks.
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Setting the Stage
We’ve all likely heard of the acronym FAANG used to describe some of the biggest publicly traded companies in the country (Facebook, Apple, Amazon, Netflix, Google) — but have you heard of MANGO?
Marvell Technology (MRVL)
Advanced Micro Devices (AMD)
Analog Devices (ADI)
Broadcom (AVGO)
Nvidia (NVDA)
GlobalFoundries (GFS)
Onsemi (ON)
In this post, I’ll be sharing exactly what companies make up “MANGO,” their financials, what Wall Street thinks of them, and finally — my own thoughts.
Should We Even Invest in Semiconductors?
Absolutely. Maybe not today, maybe not tomorrow — but yes. Semiconductors should be a part of any well-balanced, long-term portfolio.
In 2021, the global semiconductor market was value at ~$430 billion. Projected to grow around a +7% CAGR through 2030, the market will eclipse $800 billion by the end of the decade.
To ensure everyone’s on the same page when we toss around terms like “market,” we’re specifically talking about total addressable market (TAM). Essentially, this means the total revenue opportunity that is available to a company if 100% market share is achieved.
For example, Nvidia did $27 billion in revenue in 2021. Since the global semiconductor market was ~$430 billion during 2021, Nvidia only captured ~6% of global market share. The other ~94% market share was split up between the countless other companies operating in this space.
Now you might be asking yourself “What's driving this growth?"
A ton of different things — smartphones, electric vehicles, data centers, cloud computing, heck — even your fancy new refrigerator.
Using Nvidia again as an example — if you select the “Products” tab on their website, you find a laundry list of different product offerings. Gaming & entertainment, laptops & workstations, cloud & data center, networking, GPUs, and embedded systems.
Each one of those product categories has another 4+ subcategories below them — there’s a lot driving this growth into the turn of the decade.
Marvell Technology (MRVL)
Designed for your current needs and future ambitions, Marvell is a supplier of infrastructure semiconductor solutions. They mainly serve five markets — data centers, carrier infrastructure, enterprise networking, consumer, and automotive / industrial.
The company has been trading on the stock market for nearly two decades, with their most recent earnings release printing earlier this month. Revenue grew by +68%, gross profit margins expanded to 51%, and profits came in around $6 million.
Looking forward, the company is expected to grow revenue by +50% throughout 2022 — while maintaining gross profit margins of ~50%. Given their margins, growth, and continually-expanding industry, their free cash flow during 2022 is expected to triple to $1.8 billion.
💰 Current Price: $74 / share
🏦 Bank of America PT — Vivek Arya: $115 / share
“Marvell's broad portfolio of IP in computing, optics, networking, storage, and security, along with its scale and commitment to process leadership (5nm ramping, 3nm roadmap), positions it solidly in our view to address the growing need for customized, high performance silicon in the cloud, enterprise, 5G telco and automotive markets.
We reiterate our Buy, $115 PO (or $100bn market cap), and a top compute pick on MRVL.”
⚡️ My Thoughts: Excited
This company is doing everything right.
They’re operating in a massively sticky and growing industry, they’re expanding their margins, and are aggressively printing free cash flow for their shareholders. I recognize their competition (Nvidia, Intel, Broadcom) but Marvell is differentiated by having doubled down on providing the infrastructure for this digital transformation we’ll continue to experience throughout the decade.
The focus of their underlying infrastructure points to the ‘data center’ industry — with 85% of their sales going toward it. We all know ‘data is the new oil’ and massive companies are doing everything they can to collect, interpret, and act upon data.
Advanced Micro Devices (AMD)
This high-performance and adaptive computing company views the world as its oyster. They mainly operate within three segments — computing & graphics, enterprise, and embedded & semi-custom.