Market Overview

Needham Lowers Fabrinet's Price Target, Cites Loss Of Huawei Sales


U.S.-based Fabrinet (NYSE: FN) could indirectly lose out on potential revenue from China's Huawei being blacklisted to buy equipment from American companies.

The Analyst

Needham's Alex Henderson maintains a Buy rating on Fabrinet with a price target lowered from $70 to $62.

The Thesis

Huawei doesn't buy equipment from Fabrinet directly but does so indirectly through Lumentum Holdings Inc (NASDAQ: LITE), Henderson wrote in a note. Fabrinet's management said it's "trying to determine" its exposure to Huawei but the analyst says there's enough public information to assume Fabrinet's sales exposure to Huawei is between 7 percent to 10 percent.

As such, Fabrinet's 2020 revenue estimate is lowered from $1.716 billion to $1.556 billion although the impact to the current quarter will be limited as production is already in process, the analyst said. If the U.S. and China reach a trade agreement that restores Huawei's access to U.S. suppliers, it would be reasonable to restore prior estimates and the news could help Fabrinet's stock "vault higher."

Price Action

Shares of Fabrinet were trading lower by more than 3 percent at $43.39 on Tuesday afternoon.

Related Links:

Analyst: Huawei Blacklist Is $400M Risk For Google

B. Riley Downgrades Fabrinet, II-VI, Says Optical Companies 'Will Suffer The Consequences' Of Tariffs

Latest Ratings for FN

Oct 2020ScotiaBankMaintainsSector Perform
Aug 2020JP MorganMaintainsNeutral
Aug 2020Northland Capital MarketsDowngradesOutperformMarket Perform

View More Analyst Ratings for FN
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Latest Ratings

SBHMorgan StanleyUpgrades
PIIMorgan StanleyInitiates Coverage On140.0
NSJP MorganUpgrades17.0
MIKMorgan StanleyDowngrades13.0
LITEGoldman SachsUpgrades117.0
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