Marvel Technology's Unusual Put Option Activity Shows Investors Like MRVL Stock
Today, large, unusual activity in Marvel Technology Inc (MRVL) put options traded at an out-of-the-money (OTM) strike price. This implies that investors are bullish on MRVL stock. Moreover, its strong free cash flow (FCF) implies that MRVL stock could be worth 32% more at $75 per share.
MRVL is at $57.00 in morning trading on Wednesday, April 30. That is well off its 6-month high of $126.06 on Jan. 23, but up from a low of $49.43 on April 4.
Marvel stock could be worth considerably more, as will be seen in this article, based on its strong free cash flow (FCF). This might become apparent when the company releases its FY Q1 2026 results on May 29.
Barchart Unusual Options Report
Moreover, as seen by today's options activity, some institutional investors are betting that its lows have already been reached. This can be seen in the Barchart Unusual Stock Options Activity Report today.
It shows that a large tranche of out-of-the-money puts traded at the $48.00 strike price for expiry in just over 2 weeks (May 16). The strike price is well below today's trading price of $57.00 (i.e., out-of-the-money or OTM).
The table above shows that 4,500 put contracts traded with a midpoint premium of 70 cents. That implies that an investor who sold these puts short (i.e., entered an order to 'Sell to Open') would have made an immediate yield of 1.46% (i.e., $0.70/$48.00 = 0.01458).
In other words, the investor is getting paid for the potential assignment risk of having to buy shares at $48.00, which is 15.7% below today's price. There is very little risk of this happening as evidenced by the low 14.1% delta ratio (based on historical volatility patterns). Nevertheless, the investors are still paid this 1.46% for this short-put play.
Moreover, the breakeven price, even if MRVL falls to $48.00 in the next two weeks, is low at just $47.30 (i.e., $48.00-$0.70 income received). That is 17% below today's trading price.
Strong Free Cash Flow (FCF) and Higher Target Prices
On top of this, Marvel stock looks very cheap even at today's price. This is based on its strong free cash flow (FCF) results.
For example, last quarter ending Feb. 1, 2025 (from its March 5 earnings release), Marvel Technology, which designs and produces system-on-a-chip semiconductors increasingly used in data center servers for AI applications, generated $514 million in operating cash flow.
After spending $70.7 million in capex and technology licenses, its 'free' cash flow (FCF) (i.e., free to be spent on dividends, buybacks, etc.) was $443.3 million. That represented 24.4 % of its revenue, indicating a very high FCF margin.
Moreover, for the fiscal year ending Feb. 1, its $1.34 billion FCF represented a FCF margin of 24.1% of its $5.767 billion in revenue for the year. As a result, investors can be reasonably confident it will produce at least a 24.1% FCF margin over the next year.
For example, analysts now project revenue of $8.21 billion this year ending Jan. 31, 2026. That represents an increase of 42%. Using a 24.1% FCF margin estimate, the company's projected free cash flow is almost $2 billion:
0.241 x $8.21b = $1.98 billion est. FCF
As a result, using a 3.0% FCF yield metric (typical for this stock and other tech stocks and the same as a 33x FCF multiple), the value of MRVL stock is:
$1.98b / 0.030 = $66.0 billion
That is $16 billion higher (+32%) than Marvel Technology's present market cap of $50 billion. In other words, the MRVL target price is 32% higher at $75.24 per share.
Analysts Agree MRVL Stock is Cheap
Analysts also agree MRVL stock looks undervalued here. For example, 39 analysts surveyed by Yahoo! Finance have an average price target of $103.36 per share. Similarly, Barchart's mean is $111.79 per share.
Moreover, AnaChart.com, which tracks analysts who have written recently on MRVL stock, shows an average price target of $73.82 from 30 analysts. That is close to my FCF-based price target of $75.24.
The bottom line is that MRVL stock looks deeply undervalued here.
No wonder, then, some institutional investors are shorting these deep out-of-the-money put options. The 1.46% short-put yield, 17% lower breakeven price, and high price targets make this a worthwhile bet for these bullish investors.
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