Avnet (AVT) AI Stock Analysis

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Avnet

(NASDAQ:AVT)

68Neutral

Avnet's overall stock score reflects a balance of stable financial performance with profitability and liquidity challenges, fair valuation, and cautious optimism from the earnings call. Technical indicators suggest a lack of upward momentum, while valuation metrics provide some support.

Positive Factors

Demand Recovery

Asia continues to lead western regions in demand recovery returning to year-over-year growth.

Earnings

AVT delivered F1Q revenue of $5.6 billion, above the high end of its guidance range and versus Street at $5.4 billion, and an EPS of $0.92 which was also above the high end of guidance and versus Street at $0.86.

Future Outlook

Avnet remains confident in an eventual return to double-digit EBIT% with new leadership and additional cost optimization plans.

Negative Factors

Demand Environment

The demand environment is seen as weak, especially in Europe.

Farnell Margins

Farnell's catalog business has much weaker margins than expected, with operating margin at 0.5% versus an expectation for flat at 4.0%.

Inventory Correction

Negative impact from mix, inventory correction ongoing.

Avnet (AVT) vs. S&P 500 (SPY)

Market Cap

$4.01B

Dividend Yield3.13%

Average Volume (3M)1.15M

Price to Earnings (P/E)13.2

Beta (1Y)0.91

Revenue Growth-12.21%

EPS Growth-51.31%

CountryUS

Employees15,462

SectorTechnology

Sector Strength40

IndustryTechnology Distributors

Share Statistics

EPS (TTM)3.53

Shares Outstanding86,504,560

10 Day Avg. Volume1,022,801

30 Day Avg. Volume1,149,400

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.18

Price to Cash Flow (P/CF)3.00

P/FCF Ratio3.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$50.00

Price Target Upside7.74% Upside

Rating ConsensusModerate Sell

Number of Analyst Covering3

Avnet Business Overview & Revenue Model

Company DescriptionAvnet, Inc., a technology solutions company, markets, sells, and distributes electronic components. The company operates through two segments, Electronic Components and Farnell. The Electronic Components segment markets, sells, and distributes semiconductors; interconnect, passive, and electromechanical devices; and other integrated components from electronic component manufacturers. It also offers design chain support that provides engineers with technical design solutions; engineering and technical resources to support product design, bill of materials development, and technical education and training; and supply chain solutions that provide support and logistical services to original equipment manufacturers, electronic manufacturing service providers, and electronic component manufacturers. In addition, this segment provides integrated solutions, such as technical design, integration, and assembly of embedded products, and systems and solutions primarily for industrial applications, as well as for intelligent and innovative embedded display solutions comprising touch and passive displays. Further, it develops and manufactures standard board and industrial subsystems, and application-specific devices that enable it to produce systems tailored to specific customer requirements. This segment serves various markets, such as automotive, medical, defense, aerospace, telecommunications, industrial, and digital editing. The Farnell segment distributes kits, tools, and electronic and industrial automation components, as well as test and measurement products to engineers and entrepreneurs. It has operations in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Avnet, Inc. was founded in 1921 and is headquartered in Phoenix, Arizona.

How the Company Makes MoneyAvnet makes money through its distribution and sales of electronic components, which form the core of its business model. It sources components from leading technology suppliers and distributes them to a broad customer base ranging from small businesses to large enterprises. Avnet's key revenue streams include the sale of semiconductors, interconnects, passives, and electromechanical devices. Additionally, Avnet offers value-added services such as design chain and supply chain solutions, which help clients optimize their product development and manufacturing processes. Strategic partnerships with major technology companies and a strong global logistics network further contribute to Avnet's revenue streams by enhancing its ability to deliver comprehensive solutions to its customers.

Avnet Financial Statement Overview

Summary

Avnet's financial performance is characterized by stable revenue growth but profitability challenges. The balance sheet shows strength in equity but is burdened by significant debt levels. Cash flow generation has been inconsistent, posing a potential risk to liquidity.

Income Statement

Positive

Avnet shows a mixed performance on the income statement. The company has demonstrated solid revenue growth over the years, albeit with some fluctuations. The gross profit margin is relatively stable, reflecting effective cost management. However, the net profit margin has been declining, partly due to increasing operational costs. The TTM EBIT margin shows a downward trend, indicating a challenge in maintaining profitability levels.

Balance Sheet

Positive

The balance sheet reveals a strong equity base with a healthy equity ratio. However, the company carries a significant amount of debt, as indicated by a moderately high debt-to-equity ratio. The return on equity has been under pressure due to declining profitability. Overall, the balance sheet suggests a stable yet leveraged financial position.

Cash Flow

Positive

Cash flow analysis indicates that Avnet has experienced volatile operating cash flows over the years. The free cash flow growth is positive in the latest period but has shown variability in previous years. The operating cash flow to net income ratio is strong, suggesting good cash conversion, though the free cash flow to net income ratio indicates some challenges in translating profits into free cash.

TTM	Jun 2024	Sep 2023	Sep 2022	Sep 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
22.48B	23.76B	26.54B	24.31B	19.53B	17.63B
	Gross Profit
2.52B	2.77B	3.18B	2.97B	2.24B	2.06B
	EBIT
692.15M	896.92M	1.19B	939.01M	281.41M	220.60M
	EBITDA
771.00M	1.06B	1.38B	1.09B	451.10M	237.53M
	Net Income Common Stockholders
317.71M	498.70M	770.83M	692.38M	193.11M	-29.53M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
661.71M	310.94M	288.23M	153.69M	199.69M	477.04M
	Total Assets
9.30B	12.21B	12.48B	10.39B	8.93B	8.11B
	Total Debt
1.76B	3.13B	3.30B	1.87B	1.51B	1.73B
	Net Debt
1.10B	2.82B	3.01B	1.71B	1.31B	1.25B
	Total Liabilities
5.97B	7.28B	7.73B	6.20B	4.84B	4.38B
	Stockholders Equity
3.33B	4.93B	4.75B	4.19B	4.08B	3.73B
Cash Flow		Free Cash Flow
1.09B	463.51M	-908.38M	-268.21M	40.59M	656.67M
	Operating Cash Flow
1.22B	689.98M	-713.70M	-219.31M	90.95M	730.18M
	Investing Cash Flow
-128.56M	-225.48M	-211.55M	51.30M	-61.20M	-135.02M
	Financing Cash Flow
-1.17B	-433.80M	1.05B	156.06M	-314.01M	-644.55M

Avnet Technical Analysis

Technical Analysis Sentiment

Negative

Last Price46.41

Price Trends

50DMA

48.99

Negative

100DMA

50.99

Negative

200DMA

51.67

Negative

Market Momentum

MACD

-0.62

Negative

RSI

43.39

Neutral

STOCH

33.25

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AVT, the sentiment is Negative. The current price of 46.41 is below the 20-day moving average (MA) of 46.91, below the 50-day MA of 48.99, and below the 200-day MA of 51.67, indicating a bearish trend. The MACD of -0.62 indicates Negative momentum. The RSI at 43.39 is Neutral, neither overbought nor oversold. The STOCH value of 33.25 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AVT.

Avnet Risk Analysis

Avnet disclosed 19 risk factors in its most recent earnings report. Avnet reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Avnet Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SANM	74 Outperform	$3.84B	17.24	10.55%	―	-8.92%	-12.11%
NSIT	73 Outperform	$4.20B	19.64	14.24%	―	-5.17%	-9.73%
AVT	68 Neutral	$4.01B	13.15	6.45%	3.13%	-12.21%	-51.31%
ARW	66 Neutral	$5.24B	13.88	6.78%	―	-15.66%	-54.03%
SCSC	64 Neutral	$754.35M	12.66	6.79%	―	-15.92%	-25.15%
SNX	62 Neutral	$8.26B	12.30	8.40%	1.69%	4.62%	16.28%
Sector *	57 Neutral	$18.45B	9.41	-13.97%	2.74%	5.04%	-23.56%

* Technology Sector Average

Performance Comparison

AVT

Avnet

46.41

-0.88

-1.86%

ARW

Arrow Electronics

101.01

-26.72

-20.92%

NSIT

Insight Enterprises

138.88

-45.19

-24.55%

SANM

Sanmina-Sci

77.79

18.60

31.42%

SCSC

ScanSource

32.15

-8.84

-21.57%

SNX

SYNNEX

106.60

-6.85

-6.04%

Avnet Earnings Call Summary

Earnings Call Date: Jan 29, 2025 | % Change Since: -10.87% | Next Earnings Date: Apr 23, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a mixed outlook with significant challenges such as sales and margin declines, particularly in Europe and the Americas, and ongoing inventory issues. However, there are positive aspects, including strong cash flow, growth in Asia, and improved cost management at Farnell. Overall, the sentiment is cautiously optimistic about overcoming current challenges and leveraging growth opportunities.

Highlights

Strong Cash Flow Generation

Generated over $300 million of cash flow from operations in the quarter, demonstrating effective working capital management.

Asia Pacific Sales Growth

Asia Pacific region showed year-over-year sales growth of 8%, indicating strong market performance despite global challenges.

Sequential Improvement in Farnell Operating Margin

Farnell operating margin improved by 47 basis points quarter-over-quarter, reflecting effective cost management.

Positive Demand Creation Trends

Demand creation revenues increased sequentially by 5%, with design registrations and wins also increasing, indicating future revenue potential.

Debt Reduction and Improved Leverage

Reduced debt by $385 million during the quarter, bringing gross leverage to 2.9 times, showcasing financial discipline.

Lowlights

Sales Decline Year-over-Year

Overall sales decreased by 9% year-over-year, with notable declines in EMEA (25%) and the Americas (14%).

Gross Margin Decline

Gross margin decreased by 86 basis points year-over-year and 32 basis points sequentially, partly due to a sales mix shift to Asia.

Weak Market Conditions in Europe

Continued weak demand in Europe due to economic and geopolitical factors, affecting Farnell sales and overall market performance.

Prolonged Inventory Challenges

Persistent high inventory levels, with certain regions and products experiencing excess and aged inventory, impacting financial metrics.

Guidance Indicates Further Decline

Guidance for the next quarter suggests a sequential sales decline of 6% to 11%, reflecting ongoing market and demand challenges.

Company Guidance

In the Avnet Second Quarter Fiscal Year 2025 earnings call, the company reported sales of $5.7 billion and an adjusted EPS of $0.87, both surpassing the midpoint of their guidance. The results were driven by robust performance in Asia, counterbalanced by weaker markets in the West, particularly Europe. Avnet generated over $300 million in cash flow from operations, with a global book-to-bill ratio remaining below parity, indicating continued pressure on backlog due to shorter lead times and ongoing customer destocking. Despite this, cancellations have stayed at normal levels. The company focuses on optimizing inventory and cost management while investing in business growth and operational capabilities. Avnet’s guidance for the third quarter anticipates sales between $5.05 billion and $5.35 billion, with diluted EPS in the range of $0.65 to $0.75, assuming persistent market conditions and an effective tax rate between 22% and 26%.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.