Marvell Technology Stock Surges on Nvidia Investment, Sparking Huge Unusual Options Trades

Nvidia Inc.'s (NVDA) recent $2 billion investment in Marvell Technology (MRVL) and management's recent earnings guidance have pushed MRVL stock higher. That's led to huge, unusual in-the-money MRVL put options trading. These are all bullish signals for investors in MRVL stock.

MRVL is up today in midday trading at $108.86. That's up from a low price of $87.82 on March 30. It could have much further to go, as this article will show.

This was just before the March 31 announcement of a $2 billion investment by Nvidia into Marvell Technology to further the two companies' AI collaboration.

Why MRVL Stock is Worth Much More

Moreover, management recently raised its revenue projections in its March 5 earnings results. They now project revenue could reach close to $15 billion for next year (FY ending January 31, 2028).

As a result, analysts now project $14.78 billion in revenue for FY 2028. I discussed its free cash flow (FCF) projections in a recent Barchart article (March 11, “Marvell Technology's Strong Outlook Provokes Huge Unusual Options Trading.”)

I showed how MRVL stock could be worth $167.53 per share, based on a projection of $2.57 billion in FCF over the next 12 months (i.e., 20% FCF margin x a $12.86 billion next 12-month revenue forecast).

Using a 1.76% FCF yield metric, Marvell stock's value could rise to $146 billion (i.e., $2.572b/0.0176). That's still 22% higher than its market value today of $95 billion.

So, using today's price, a new price target is:

  $108.86 x 1.22 = $132.81 price target - next 12 months (NTM)

However, using management's guidance for FY 2028 revenue and analysts' forecasts ($14.78 billion), FCF could rise to almost $3 billion using a 20% FCF margin. As a result, MRVL could be worth $167.7 billion (i.e., $2.952b/0.0176), or +76.6% higher:

  $108.86 x 1.766 = $192.25 price target (FY 2028)

So, on average, our price target is $162.53 over the next year or so. That could be why MRCL is rising. 

In addition, analysts have been raising their price targets. For example, Yahoo! Finance's analyst survey PT is now $121.25, up from $120.28 as seen in my March 11 Barchart article.

It could also be why there is unusual put option volume today in MRVL stock.

Huge, Unusual MRVL Put Options Volume 

This can be seen in Barchart's Unusual Stock Options Activity Report today. It shows that over 2,900 put options have traded at the $110.00 strike price expiring May 15 (39 days from now). That is almost 25x the prior number of put options outstanding.

Note that the put option strike price is actually higher than today's price. This means it is “in the money (ITM).” The buyers of the puts expect MRVL will stay below $110 by May 15, but the sellers think it will be higher.

And the latter have a pretty good deal, especially if MRVL keeps rising.

For example, selling ITM puts at $110 results in an actual breakeven cost of just $101.75, i.e., 7% below today's price. This is because they immediately receive $8.75 in premium income, and that reduces their cost, if MRVL stock stays at $110 by May 15:

  $110.00 - $8.75 = $101.75, i.e., 7% below $108.80

Moreover, if MRVL rises above $110 by May 15 (assuming this happens reasonably soon before the put contract is exercised), the investor keeps the premium. As a result, their yield is very high:

  $8.75 premium /$110.00 invested = 0.07955 = 7.956% yield for 39 days

In other words, this is a way to make a one-month (actually a little longer) yield of 8%: Short ITM MRVL puts. So, if an investor can repeat this over the next 3 months, they stand to make almost 24:

  7.956% x 3 = 23.868% shorting ITM puts over 3 months. That's the same as buying MRVL stock today and seeing it rise to $134.76.

Given our MRVL price target of $132.81 for the next 12 months, this shows why investors are willing to short MRVL in-the-money puts. Stay tuned for good things to happen with MRVL stock and in-the-money MRVL short put plays.