Why Marvell Technology Stock Plunged 28.1% This Week
Investors don't see Marvell's new acquisition as being so marvelous.
Marvell Technology stock experienced a significant plunge of 28.1% this week after announcing an agreement to acquire optical components provider Lumentum Holdings in an all-stock transaction valued at $115 billion. The stock closed at $141.20 on Friday, Nov. 6, marking a 32% drop from the previous Friday's close. This sharp decline places Marvell below the S&P 500's 2.7% and Nasdaq-100's 4.9% weekly losses.
The all-stock deal involves Marvell issuing 4.5 shares for each Lumentum share outstanding, diluting existing shareholders as the total share count expands. Analysts at Bank of America and TD Cowen have cut their ratings to neutral and hold, respectively, citing that cost cuts offset by the increase in share count will be insufficient.
The acquisition must still secure regulatory approvals in China and the U.S., a process expected to take until early 2028. While the deal could expand Marvell's market into AI connectivity, the significant share dilution and regulatory uncertainties raise concerns about the execution risks and potential channel conflicts with Marvell's existing customers.
Marvell's stock is now down 57.2% from its 52-week high of $329.88, and its trailing P/E ratio of 52.6 indicates a high valuation, given the execution risks associated with the acquisition.
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