Fabrinet's Growth Prospects Bolstered by Major Partnerships

Fabrinet (FN) showcases significant revenue growth and strategic partnerships, particularly with Amazon and Nvidia, positioning it as a strong buy for investors seeking AI and tech growth. Analysts predict robust earnings growth ahead.

Date: 31-03-2025

AI Rating: 8

Earnings Performance: Fabrinet has demonstrated impressive financial metrics with an average revenue growth of 13% over the past six years, and it is projected to achieve an 18% revenue increase for FY25, reaching $3.78 billion. Furthermore, the consensus earnings estimates have improved post its Q2 FY24 results, with anticipated earnings growth of 16% in FY25 and 11% in FY26. Revenue Growth and Client Relationships: The report highlights Fabrinet’s significant role within the tech ecosystem, particularly related to AI infrastructure, where it partners with key players like Nvidia and Amazon. Nvidia accounts for approximately 35% of Fabrinet's FY24 sales, underlining its critical nature in revenue generation. Additionally, the recent partnership with Amazon—whereby Amazon will purchase warrants for a considerable stake—solidifies Fabrinet’s foothold in the rapidly expanding AI sector. Market Valuation: Fabrinet currently trades at a 15% discount compared to the broader tech sector, and it's 30% below its all-time highs. This suggests that the stock might be undervalued, providing a potential entry point for investors. Moreover, despite its impressive growth trajectory, its forward P/E ratio stands at 20.4X, aligning with its five-year median, making it an attractive investment option. The favorable balance sheet with more cash than liabilities indicates financial stability, which is vital during economic fluctuations. Given these metrics and external market conditions favoring AI investments, Fabrinet appears well-positioned for growth. Should its revenue expansion and market demand continue, investors may be well-informed to consider adding to their positions in FN, particularly near current price levels, promoting a positive outlook over the next one to three months.

Stocks: FN NVDA AMZN