JPMorgan Adds Fabrinet To Focus List After Stock's 30% Decline

The valuation of Fabrinet FN led JPMorgan to add the tech manufacturer to the firm's focus list Thursday.

JPMorgan has an Overweight on Fabrinet and raised their price target on the stock from $55 to $57. “We believe the recent sell-off (down 28 percent since Feb. 21 peak/S&P up 2 percent) presents an attractive GARP entry point. We are buyers here," analyst Paul Costersaid in a note.

Why A Top Pick?

100G deployments in North America have been driving growth for optical components, and Chinese demand is set to pick up soon, Coster said. Fabrinet is likely to benefit from this upgrade cycle, the analyst said. Fabrinet's operating leverage should increase “as opex grows slower than revenues with management indicating capacity for improvement driven by scale and as new facilities begin to ramp," according to the JPMorgan note.

Fabrinet has developed a larger footprint with their campus in Santa Clara and with Exception EMS in the UK. These locations provide “turnkey solutions and prototypes getting in early during the design cycle," Coster said.

Fabrinet Chief Financial Officer Toh-Seng Ng had a positive tone at JPMorgan’s TMT conference, according to the firm's note.