Fabrinet: Capacity Expansion and Hyperscale Demand Drive Compelling Long-Term Growth and Support Buy Rating

Fabrinet, the Technology sector company, was revisited by a Wall Street analyst today. Analyst Christopher Rolland from Susquehanna reiterated a Buy rating on the stock and has a $570.00 price target.

Christopher Rolland has given his Buy rating due to a combination of factors that underscore Fabrinet’s strong positioning across several high-growth end markets. He highlights that despite a temporary drag from the ongoing 200G EML component shortage affecting Datacom, Fabrinet still delivered better-than-anticipated results and guidance, driven by a faster ramp of its AWS high-performance computing program and robust performance in traditional telecom systems. The recent qualification of a second EML supplier for NVIDIA is expected to ease supply constraints and support quarter-over-quarter Datacom growth going forward, while management remains optimistic about winning additional hyperscaler and merchant transceiver business. He also notes that although current revenue from co-packaged optics is still modest, Fabrinet is ahead of its customer’s production timetable, and the company is increasingly confident in its emerging optical circuit switch initiatives, where it is already engaged on multiple projects.
Beyond the near-term product and customer dynamics, Rolland points to particularly strong telecom results, with upside coming from non-DCI telecom as an important systems program with Ciena ramped earlier than planned, and he expects data-center interconnect growth to accelerate as 800ZR component constraints ease. The AWS HPC program ramped faster than previously forecast and is now projected to exceed a $150 million annualized run rate in the next couple of quarters, marginally ahead of prior expectations and reinforcing the growth trajectory in HPC. He underscores that Fabrinet is aggressively expanding its manufacturing footprint—advancing the timeline of its new Building 10 and adding substantial space at Pinehurst—to capture a broad pipeline of future opportunities. With gross margins tracking in line with expectations and multi-year secular tailwinds across Datacom transceivers, DCI, co-packaged optics, low Earth orbit satellite communications, HPC, and OCS, Rolland concludes that the long-term growth and earnings outlook remains compelling, supporting his Buy rating and premium valuation framework.

In another report released today, J.P. Morgan also reiterated a Buy rating on the stock with a $530.00 price target.