03:40 PM EST, 03/08/2024 (MT Newswires) -- Marvell Technology's ( MRVL ) fiscal first-quarter outlook was well short of expectations, though the semiconductor solutions provider is likely to stage a "material snapback," aided by strong prospects in its cloud custom silicon business, Morgan Stanley said Friday.

Late Thursday, the company said it expected first-quarter adjusted earnings of $0.23 a share, plus or minus $0.05, and net revenue of $1.15 billion, plus or minus 5%. Morgan Stanley was looking for $0.43 and $1.40 billion, respectively. Sequentially, Marvell ( MRVL ) sees consumer, carrier, and enterprise networking sales slumping by 70%, 50%, and 40%, respectively, Chief Executive Matt Murphy said on an earnings conference call late Thursday, according to a Capital IQ transcript.

The company's shares were down nearly 11% in late Friday afternoon trade.

Although the magnitude of the outlook miss was surprising, it is expected to mark the bottom, with a "material snapback" likely amid positive commentary around the cloud custom silicon opportunity, Morgan Stanley said. The company is beginning to ramp for two customer wins, and is likely to surpass its $800 million cloud-optimized silicon revenue target run rate by the end of this year, according to the note.

"Storage has already started to snap back in data center, offset by consumer," the brokerage wrote. Automotive and industrial are stabilizing following a couple of weaker quarters in the industrial segment, with "strong" drivers of growth in automotive Ethernet.

The firm said that while it's "certainly possible" that Marvell's ( MRVL ) cloud custom silicon potential can outgrow that of Nvidia ( NVDA ) , there have been several false starts in that business overall in the past. Marvell ( MRVL ) is yet to post an EPS run rate that would make its stock look "inexpensive" at present levels, Morgan Stanley said. The brokerage slashed its price target on the stock to $71 from $84 while reiterating its equal-weight rating, saying it prefers other AI names at current levels.

The company's fourth-quarter revenue of $1.43 billion topped Wall Street's views as AI led "strong growth" in its data center end-market sales, Murphy said in a statement late Thursday. Morgan Stanley said it "lacked enthusiasm" for Marvell's ( MRVL ) growth prospects in 5G or cloud. However, the firm is now "more bullish on the growth picture" than in previous cycles amid the AI strength and the company's strong position, especially in optical.

"It has been clear for a while that there would be digestion period for PAM4 optical, which we are now seeing, and we do expect at least one of Marvell's ( MRVL ) projects in custom silicon to ramp sharply this year," the brokerage wrote.

Separately, the company said late Thursday its board increased its stock repurchase program by $3 billion.

Price: 76.13, Change: -8.96, Percent Change: -10.53