Shares of Fabrinet (FN) skyrocketed in early trading on Tuesday, fueled by strong fourth-quarter earnings that exceeded expectations. The positive results came amid a season of exciting earnings reports from various companies. Key analysts weighed in on the news, offering their perspectives on the company’s future prospects.
JPMorgan analyst Samik Chatterjee reiterated a Neutral rating on Fabrinet while increasing the price target from $240 to $285. He noted that Fabrinet’s Datacom business, driven by tailwinds related to Artificial Intelligence (AI) investments, has been a source of upside in recent quarters. However, Chatterjee highlighted that the company’s non-Datacom businesses surpassed expectations in the fiscal fourth quarter, driven by robust demand in the Data Center Interconnect (DCI) sector and new system wins in Telecom. This success, according to Chatterjee, also stemmed from the dissipation of inventory headwinds associated with electric vehicle battery chargers.
Chatterjee expressed optimism about Fabrinet’s future prospects, stating that management has guided for sequential revenue growth across all product categories in the first quarter of fiscal 2025. He believes this growth will lead to aggregate revenue exceeding expectations. Fabrinet’s ability to attract new customers is evident, as Chatterjee emphasized a significant new win with Ciena (CIEN), which he believes could surpass the company’s previous largest Telecom customers in scale. Additionally, Chatterjee noted the acquisition of six ZR customers, signifying Fabrinet’s capacity to secure and expand new businesses, particularly amidst recent mergers and acquisitions (M&A) and management transitions within the industry.
Needham analyst Alex Henderson maintained a Buy rating on Fabrinet, while raising the price target from $270 to $280. He attributed the strong earnings and guidance to a significant new customer win in Fabrinet’s Systems business with Ciena and a major new plant expansion, twice the size originally anticipated. Henderson highlighted the $110 million capacity expansion as a testament to Fabrinet’s confidence in its growth trajectory. He further stated that the new plant is expected to handle an additional $2.4 billion in annual revenue when fully operational, with a minimal impact on gross margins (GMs) at opening, expected to recover as capacity ramps up.
Fabrinet’s share price surged by 19% to $275.55 at the time of publication on Tuesday, demonstrating investor enthusiasm for the company’s future performance. The strong earnings and optimistic analyst perspectives paint a picture of continued growth for Fabrinet in the coming quarters.
