Fabrinet (FN): A Bull Case Theory

We came across a bullish thesis on Fabrinet (FN) on Substack by Industrial Tech Stock Analyst. In this article, we will summarize the bulls’ thesis on FN. Fabrinet (FN)’s share was trading at $199 as of April 24^th. FN’s trailing P/E was 22.26 according to Yahoo Finance.

A technician wearing protective glasses installing optical fibers and cables.

Fabrinet’s issuance of 381,922 warrants to Amazon, disclosed in an 8-K filing, marks a significant strategic development that strongly signals Amazon’s emergence as a new customer. The warrants, exercisable at $208.48 per share and expiring in 2032, suggest a long-term alignment between the two companies and validate Fabrinet’s position in the hyperscaler supply chain. This move is especially bullish considering recent investor concerns about Fabrinet’s near-term prospects, largely stemming from its cautious commentary on data center demand and its dependency on Nvidia. These concerns have centered around hyperscaler de-bundling trends, where firms like Amazon are increasingly separating purchases of GPUs from discrete optical components, potentially threatening Fabrinet’s traditional role in bundled supply chains. However, the Amazon warrant deal flips that narrative on its head. It implies that Amazon has selected Fabrinet as a key partner for optical component production—turning a perceived risk into a strategic win. Historically, Amazon has issued warrants to suppliers it considers vital to its long-term operations, making this a powerful signal of trust and partnership. The deal not only confirms Fabrinet’s relevance beyond Nvidia but also suggests a more diversified and resilient customer base moving forward. With optical networking demand expected to rise, particularly among hyperscalers like Amazon, Fabrinet is now better positioned to benefit from secular growth trends. Investors should view this development as a strong counter to bear narratives around customer concentration and potential demand softness. The market seems to agree—shares of Fabrinet surged 11% on the news. Overall, this warrant issuance represents a major vote of confidence from one of the largest tech companies in the world and provides a strong catalyst for Fabrinet’s long-term growth story, offering significant upside potential for equity holders.

Fabrinet (FN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held FN at the end of the fourth quarter which was 42 in the previous quarter. While we acknowledge the risk and potential of FN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.