Goldman Sachs lowered its rating on semiconductor company Marvell (MRVL) to Sell from Neutral. Warning that many of the company's markets are declining, the firm thinks that the shares' valuation has become stretched. Goldman adds that reductions in Marvell's R&D spending will make it harder for the company to mount a comeback.

WEAK END MARKETS: Hard disk drive makers, whose market is declining, account for about 40% of Marvell's sales, wrote Goldman's analyst Mark Delaney. In the networking market, which accounts for 25%-30% of Marvell's revenue, the company is more exposed to the relatively mature campus and enterprise segments than the faster growing data center segment, according to Delaney.

DIFFICULT TURNAROUND: It's difficult for semiconductor companies to carry out turnarounds, given the long amount of time it takes them to develop products, the analyst wrote. Moreover, cuts that Marvell has made to its R&D budget will cause the turnaround to be more difficult to achieve, Delaney warned. "It will be very difficult" for Marvell to generate "a sustained turnaround," he stated.

VALUATION, TARGET: After Marvell surged 59% so far this year, it "trades at a premium on many metrics," Delaney stated. The analyst trimmed his price target on the shares to $12 from $14.

PRICE ACTION: In early trading, Marvell rose nearly 1% to $14.11 per share. Year-to-date the stock has advanced about 60%.