Contract manufacturer Fabrinet is grabbing a slice of the artificial intelligence infrastructure spending boom thanks to its expertise in making optical networking gear. That has driven Fabrinet stock to record heights.
Rosenblatt Securities analyst Mike Genovese on Thursday initiated coverage for Fabrinet stock with a buy rating and price target of 230.
In morning trades on the stock market today, Fabrinet stock spiked to an all-time high of 174.41 before pulling back. FN stock ended the regular session up 2.4% to 174.12.
"The company is one of the earliest and most direct beneficiaries of the strong ramp of the AI 800G optical supply chain," Genovese said in a note to clients. 800G is an ultra-high-speed network communications technology that uses high-capacity fiber optic cabling to link computers. The equipment moves data at 800 gigabits per second.
Nvidia Is Key Customer
Fabrinet makes very-short-reach active optical cables with 800G transceivers for AI chipmaker Nvidia.
Fabrinet's 800G AI transceiver revenues have grown to an annual run rate of $500 million, Genovese said. "We are modeling this business to double over the next 2.5 years," he said.
Meanwhile, he predicts a recovery in Fabrinet's core telecom and data communications businesses.
"Fabrinet is the most important supplier of optical (communications) contract manufacturing services with unparalleled industry focus, expertise, and customer intimacy," Genovese said.
Fabrinet Stock Is Recent Breakout
On Aug. 22, Fabrinet stock rocketed over 31% after the Thailand-based company reported better-than-expected sales and earnings for its fiscal fourth-quarter ended June 30. With the move, it broke out of a flat base at a buy point of 134.95, according to IBD MarketSmith charts.
Fabrinet stock is one of five electronics contract manufacturers on the IBD Tech Leaders list. Others are Celestica, Jabil, Kimball Electronics and Flex.
FN stock has an IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup. That puts it in the top 2% of stocks for performance over the past 12 months.
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