Marvell Stock Is a Metaverse "Pick and Shovel" Play

The metaverse is going to be big. I mean really big. Market estimates vary widely - and wildly.

Consider the range of numbers discussed in a November MarketWatch article...

Epic Games CEO Tim Sweeny used the phrase "multitrillion-dollar" in reference to the metaverse's potential. Roblox Corp. (NYSE: RBLX) chief David Baszucki projects the metaverse will be a $200 billion market, while Bloomberg Intelligence puts the figure at closer to $800 billion.

If a fraction of that potential is realized, it'll be one of the most lucrative investing trends of the 21st century.

Of course, the metaverse is nowhere near being fully realized, but it's already handing well-positioned investors the kind of huge profits that come from owning companies providing the critical infrastructure used to make a virtual universe a reality.

Meta Platforms Inc. (NASDAQ: FB) - the company formerly known as Facebook - has already invested more than $16 billion in building and operating 18 Facebook Cloud campuses in the United States. It expects to invest as much as $34 billion as it retools its data centers and networks for the demands of a fully global, fully realized, and functional metaverse.

The Facebook spend is big, that's for sure, but it's only part of a global demand explosion for data centers. And it is an "explosion" - by the time 2021 is out, global data center infrastructure spending will hit $200 billion.

That is an (almost) unbelievable profit "tailwind" for companies supporting and involved in these data center buildouts.

And here's the one I think everyone needs to own now...

The One Thing the Metaverse Needs More Than Anything

This emerging metaverse will never be widely adopted if global networks aren't fast enough to keep the user experience exciting and engrossing. If the party is too slow and choppy, users will bail out in droves.

Nowadays, even the most popular communal gaming experiences are limited by how many users can join and play at any given time, in part, because of network limitations.

That means the metaverse will need significantly faster global networks to meet its potential.

The world is in the middle of a high-stakes expansion of that capacity right now. Global 5G network infrastructure revenue is on pace to grow 39% to total $19.1 billion in 2021; that's up from $13.7 billion in 2020. Spending is expected to reach 23.25 billion in 2022, according to the latest forecast by Gartner Inc.

That makes Marvell Technology Inc. (NASDAQ: MRVL) a must-own stock right now. The company is practically a one-stop shop for data centers, offering most or all of the hardware needed for a data center - ultra-high-performance chips, networked "hyperscale" storage, and a lot more.

The market is taking notice. The stock is up 15% since last week when, as stocks were taking a pounding all over, Marvell announced better-than-expected Q4 guidance on top of stellar Q3 results.

Over the last three months, earnings came in at $0.43 per share on revenue of $1.21 billion, which easily topped analyst estimates of $0.38 per share on revenue of $1.15 billion.

Driving the Q3 numbers was the company's data center business, which represented 41% of total quarterly revenue and grew 15% sequentially and 109% year over year.

Looking ahead to the next year, EPS was guided in a range of $0.45 to $0.51 on revenue of approximately $1.32 billion. This is compared with estimates for EPS of $0.42 on revenue of $1.21 billion.

The company also expects its 5G operations to increase 30% sequentially and its data center business to grow in the double digits.

I like everything about those numbers. Not only are they strong on their own, but they're also backed up by two of the strongest growth opportunities in the global IT space.

Now, Marvell has had a deservedly good few trading sessions, so by all means, wet your beak at $83. But this is a stock I like owning for the long term, as the metaverse becomes a reality, so I'm looking to own it at lower levels, too.

If MRVL trades down to $77.50 by Dec. 17, 2021, I like buying the MRVL Feb. 18, 2022 $77.50/$80 call spread for $1.20 or less. Plan on closing and selling that call spread for a 100% profit, or if shares of MRVL close below $70.50.

I can't overstate the impact the metaverse is going to have up and down the market. Its biggest impact, though, could be on some of the smallest players. We're looking at two stocks and one crypto right now - each one trading for less than $30 - that could soar 1,000% over the next few years. You can get the details right here...

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About the Author

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

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