Marvell Technology ( MRVL ) stock has been in a strong bull run this year, helped by the recent NVIDIA ( NVDA ) investment and the ongoing artificial intelligence boom. This rally will be put to the test when the company publishes its earnings this week.

Marvell Technology Stock Gets Overvalued Ahead of Earnings

Marvell ( MRVL ), a company in the semiconductor industry, has surged this year, helped by its strong revenue growth and a $2 billion investment from NVIDIA ( NVDA ). 

The most recent earnings showed that its business continued to grow, helped by partnerships with companies like Amazon ( AMZN ) , Microsoft ( MSFT ) , and Alphabet . 

Its revenue jumped by 22% in the fourth quarter, and analysts expect the growth to continue. The average estimate among analysts tracking the company is that its revenue rose by 26% in Q1. This growth will partially be driven by its Celestial AI and XConn acquisitions. 

The annual revenue is expected to jump by 33% and 36% this year and in 2027. Its earnings will likely be better than expected as it has always done in the past few years.

The challenge, however, is that its valuation multiples show that it has become one of the most overvalued companies in the semiconductor industry. 

It spots a forward price-to-earnings ratio of 98, higher than the sector median of 32. In contrast, the faster-growing NVIDIA ( NVDA ) has a multiple of 22, while Micron has 12. 

At the same time, the stock is much higher than the consensus price target. While most analysts have a buy rating, their consensus of $137 is lower than the current $197. This means that it will need to report stronger-than-expected results and forward guidance.

MRVL Stock Has Become Highly Overbought

Technicals also suggest that MRVL stock has become highly overbought. The Relative Strength Index has risen to 72, while both lines of the Stochastic Oscillator have crossed into overbought territory. It is forming a bearish divergence as the RSI points downward even as the stock continues to rise.

At the same time, the stock has deviated substantially from its historical moving averages. Its 50-day moving average is at $145, while the 100-day EMA is at $123. 

MRVL stock chart | Source: TradingView

Therefore, there is a risk that the overbought stock will retreat after earnings since it has also formed a rising wedge pattern. The drop will also happen because of the concept known as mean reversion, where an asset moves back to its historical averages.

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