Marvell Technology's stock is expected to decline after the company revealed plans to acquire photonics firm Lumentum Holdings in a deal exceeding $100 billion. Bank of America analyst Vivek Arya downgraded Marvell's rating from buy to neutral and reduced the price target from $400 to $225, indicating a 31% upside from the stock's closing price on Monday.
Arya expressed concerns regarding an extended regulatory review process, particularly in China, limited earnings per share growth due to significant dilution from the acquisition, and potential conflicts with customers and distribution channels. Following the announcement, Marvell's shares dropped 13%, contributing to a nearly 12% decline over the past three months.
The semiconductor sector is also facing challenges, with the Philadelphia Semiconductor Index down about 19% in the last month. Despite Bank of America's cautious stance, the majority of analysts covering Marvell remain optimistic, with 40 out of 45 maintaining a buy or strong buy rating