📈 Fabrinet (NYSE:FN) is set for a strong 2024, already achieving a 21% stock gain thanks to its partnership with Nvidia. As AI demand boosts growth in data centers and telecom, Fabrinet’s strategic position makes it a key player. Despite a recent pullback to $233, the company remains an attractive option for investors looking to capitalize on the AI trend. For those seeking a lower-risk AI investment, Fabrinet’s strong fundamentals make it a compelling choice.
💡 In Q4, the company achieved a record $753.3 million in revenue—a 14.9% year-over-year increase, largely due to Nvidia’s production ramp. With 35% of its revenue now linked to Nvidia, up from 12.5% in 2023, Fabrinet has increased its reliance on this partnership. While this introduces risk, it also contributed to a 34% EPS growth last quarter, highlighting the profitability of their collaboration.
🚀 Fabrinet’s expansion continues with the construction of a larger 10th facility, set to double its current capacity. This shows management’s confidence in future demand through 2025. The added capacity will allow the company to shift focus from slower telecom segments to faster-growing areas like automotive and data centers.
🔧 Fabrinet is also advancing in high-speed data solutions like 800 gig and future 1.6 terabyte options to meet AI’s growing data needs. With automotive growth rebounding and a debt-free balance sheet, Fabrinet’s conservative strategy supports sustainable long-term growth without taking on excessive risks.
💵 The $200 million buyback program and $858 million in cash reserves add value for shareholders. At 23x forward earnings, Fabrinet might seem expensive, but given its growth outlook and strong financials, it’s clear why investors are optimistic. For those seeking an under-the-radar AI investment, Fabrinet is a solid pick worth considering.
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IMPORTANT: This article is of general nature only and readers should obtain advice specific to their circumstances from professional advisers.