Why Fabrinet Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronic manufacturing services specialist Fabrinet (NYSE: FN  ) sank 15% today after its quarterly results and outlook missed Wall Street expectations.

So what: The stock has soared over the past year on better than expected growth, but an in-line third quarter -- adjusted earnings per share of $0.34 on a revenue increase of 8% -- coupled with downbeat guidance is forcing Mr. Market to sober up a bit. On the bright side, Fabrinet's operating margin expanded about 500 basis points over the year-ago period to 75.4%, suggesting that its competitive position is strengthening nonetheless.

Now what: For the current quarter, management now sees adjusted EPS of $0.33-$0.35 on revenue of $169 million-$173 million, below the consensus of $0.39 and $174.1 million. "With industry demand showing signs of improving, I am confident that we will continue to execute on our vision of providing world-class service to our customers and delivering profitable growth for our shareholders," CEO Tom Mitchell reassured investors in the company's earnings press release. More important, with Fabrinet shares now off about 20% from their 52-week highs and sporting a single-digit P/E, the market might finally be offering a cheap opportunity to buy into that bullishness. 

Will this stock be your next multibagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2945601, ~/Articles/ArticleHandler.aspx, 10/2/2014 7:11:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement