7. Fabrinet (NYSE:FN)
Number of Hedge Fund Holders: 31
Fabrinet (NYSE:FN) is an electronic manufacturing company that provides optical packaging and precision optical, electro-mechanical, and electronic manufacturing services, primarily serving original equipment manufacturers (OEMs). It has over 12,000 employees worldwide in various markets, including developing and producing AI-powered devices, supporting the broader AI ecosystem.
In the fourth fiscal quarter of 2024, the company made a revenue of $753.26 million, up 14.85% from the same quarter in the previous year. The earnings per share were $2.41. Both of these financials beat Street estimates. This marked the fourth consecutive quarter for the company with record revenues and EPS figures.
Datacom revenue grew over 120% year-over-year, offset by a telecom revenue decline of over 20%, due to the protracted inventory digestion across the telecom industry.
The company’s revenue is growing due to new AI products in datacom. Despite negative AI stock sentiment, its strong growth in fiscal 2024 makes it worth considering. 800 gig products for AI and related applications remain its largest revenue driver in Datacom, partially offsetting the completion of a long-running 100 gig program.
Non-optical communications revenue grew double-digits, driven by automotive recovery. The company expects sequential revenue growth from all major product categories in Q1 of fiscal year 2025. It’s also investing in expanding its manufacturing capacity with Building 10 in Chonburi.
Fabrinet (NYSE:FN) plans to repurchase up to $139.5 million of its own stock, an expansion of its existing stock buyback program. In the FQ2 2025, it repurchased ~21,000 shares, with a total of 212,000 shares for the full fiscal 2025. This buyback program improves investor sentiments, and AI expansion strategies position the company for long-term growth.
FPA Queens Road Small Cap Value Fund stated the following regarding Fabrinet (NYSE:FN) in its Q2 2024 investor letter:
“Fabrinet (NYSE:FN) is a contract manufacturer of optical communications components and modules. The company has a dominant position in hard-to-replicate precision-manufacturing technologies and an enviable track record of execution. The majority of Fabrinet’s sales are to networking equipment manufacturers, but it has been successfully diversifying into the data center, industrial, auto, and medical end-markets. FN’s stock jumped after reporting June 2023 earnings – datacenter sales increased 50% sequentially and more than 100% over the previous year, driven by their 800-gigabyte transceivers for Artificial Intelligence applications. The company also announced that Nvidia is a 10%+ customer.
Fabrinet was a top-five holding in the Fund before its June 2023 earnings announcement. Since then, the stock has appreciated considerably and we have trimmed in keeping with our risk management policies. Given the growth in its forward earnings estimates, Fabrinet trades in line with its historical earnings multiples and remains a top five position for us.”
