Fabrinet (NYSE: NYSE:FN), a provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services, saw its price target increased by B.Riley from $171 to $196, while the firm maintained a Neutral rating on the stock.
This adjustment comes after Fabrinet reported its fiscal fourth-quarter sales and earnings per share (EPS) that surpassed market expectations. The company recorded sales of $753 million and EPS of $2.41, outperforming the consensus estimates of $733 million in sales and $2.24 EPS.
The quarter-over-quarter growth for Fabrinet was primarily attributed to its non-800G segment. The company's Datacom sector saw a 3% increase to $315 million, while its 800G+ revenue experienced a modest rise of 0.7% to $259 million. In contrast, its 400G revenue remained unchanged at $224 million. Notably, Fabrinet's competitor Coherent (NYSE:COHR) observed a significant quarter-over-quarter increase of approximately 25% in its 800G revenue, reaching $250 million.
Despite a slight 1.5% decrease in Telecom revenue to $282 million, the decline was less than anticipated, with certain products showing signs of recovery, particularly in the DCI and ZR/ZR+ areas.
Additionally, Fabrinet announced a new business win related to modems from Ciena (NYSE:CIEN), which is expected to start contributing to the company's revenue in the first half of the calendar year 2025. The Non-Opcomm segment of Fabrinet's business grew by 12% to $157 million, with the automotive sector contributing a 17% increase to $86 million.
The company's operating margin remained stable quarter-over-quarter at 10.7%. For the fiscal first quarter, Fabrinet provided a sales and EPS outlook ranging between $760 million to $780 million and $2.33 to $2.40, respectively, which is above the consensus forecast of $747 million in sales and $2.26 EPS.
In other recent news, Fabrinet's fourth-quarter revenue reached $753 million, marking a 15% year-over-year increase, and non-GAAP EPS exceeded expectations at $2.41. Full-year revenue also climbed to $2.9 billion, a 9% increase from the previous year.
Fabrinet's robust financial results were complemented by an optimistic growth strategy, including a major expansion with the construction of a new facility and a significant customer win with Ciena.
InvestingPro Insights
Following the recent update from B.Riley on Fabrinet's stock, InvestingPro provides additional insights that may be valuable to investors. According to real-time data from InvestingPro, Fabrinet boasts a market capitalization of $8.37 billion, showcasing its substantial size within the industry. The company's P/E ratio stands at 30.41, indicating investors are willing to pay a higher price for earnings, which aligns with B.Riley's application of an adjusted P/E multiple in their analysis. Over the last twelve months as of Q3 2024, Fabrinet reported a revenue growth of 8.08%, signifying steady business expansion.
An InvestingPro Tip highlights that Fabrinet's management has been actively engaged in share buybacks, a move that often reflects confidence in the company's future prospects and can be attractive to investors. Additionally, the company holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. On the other hand, Fabrinet is trading at a high P/E ratio relative to near-term earnings growth, which may suggest the stock's current valuation is optimistic given the expected pace of earnings expansion.
For those interested in deeper analysis, InvestingPro offers further tips on Fabrinet, including insights on profitability, analyst predictions, and historical returns. There are 13 additional InvestingPro Tips available that could provide a more comprehensive understanding of Fabrinet's financial health and future outlook. Visit https://www.investing.com/pro/FN to explore these exclusive insights.
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