What happened
Fabrinet (FN 1.89%) stock is seeing huge gains this week. The electronics manufacturer's share price was up 32% from last week's market close as of 1:45 p.m. ET this Friday, according to data from S&P Global Market Intelligence.
Before the market opened on Aug. 21, Fabrinet published results for the fourth quarter of its last fiscal year, which ended June 30. The company delivered sales and earnings for the period that came in better than Wall Street had anticipated. The business recorded non-GAAP (adjusted) earnings per share of $1.86 on revenue of $655.87 million, beating the average analyst estimate's call for adjusted per-share earnings of $1.80 on sales of $641.41 million.
So what
Fabrinet grew revenue 11.6% year over year in Q1, and adjusted net income rose 9.3% in the period. Crucially, the company's better-than-expected sales came from a source that delighted Wall Street.
In its quarterly earnings call, management revealed that revenue for its datacom segment had more than doubled year over year and risen more than 50% on a sequential-quarterly basis thanks to electronics provided to an AI data center run by a customer. CEO Seamus Grady added that he sees the rising AI market as a very significant opportunity and that his company is aiming to grow beyond having just one customer in the category.
Now what
For its current fiscal quarter, Fabrinet is guiding for adjusted earnings between $1.60 per share and $1.67 per share and sales between $650 million and $670 million. For comparison, the company recorded sales of $655.4 million and adjusted earnings of $1.97 per share in last year's Q1.
FN PS Ratio (Forward) data by YCharts.
Following the explosive gains this week, Fabrinet is valued at roughly 19 times this year's expected earnings and two times expected sales. While the company is guiding for relatively modest sales growth and a decline in earnings in the current quarter, investors are hoping that growth will accelerate as the company makes a bigger push into electronics for AI data centers.
