Fabrinet

Fabrinet shares fell 6.9% after hours to $557.14 despite reporting record fiscal fourth-quarter revenue of $1.316 billion, up 45% from a year earlier, and non-GAAP EPS of $4.10, both topping consensus estimates. The company guided fiscal first-quarter revenue to $1.375 billion to $1.425 billion and non-GAAP EPS to $4.10 to $4.25, also above consensus, yet the stock reversed a 5% regular-session gain. The selloff suggests the market's hurdle had moved well beyond published estimates after an AI-driven rally, with the stock trading at approximately 46 times newly reported fiscal 2026 GAAP EPS at the regular-session close of $598.58. Management said growth did not come from any one product category or customer, with data-center revenue increasing 68% to $669 million and becoming its largest category at 51% of sales, while communications-infrastructure revenue rose 40% to $413 million and automotive, industrial and other revenue increased 8% to $234 million. Non-GAAP operating margin reached 10.9%, its highest level in three years, but non-GAAP gross margin fell 30 basis points to 12.2% and the company reported negative $36.9 million of company-defined non-GAAP free cash flow as quarterly capital expenditures reached $92 million.

Stock futures edged lower on Tuesday as investors weighed a fresh surge in crude oil prices driven by stalled diplomatic talks and lingering concerns over a prolonged blockade of the Strait of Hormuz. Amylyx Pharmaceuticals climbed 44% after its Phase 3 LUCIDITY trial of avexitide met its primary and all secondary endpoints, with the once-daily injectable reducing Level 2 and Level 3 hypoglycemic events by 55% versus placebo over 16 weeks. Duos Technologies Group rose 21% after reporting upbeat Q2 results and reaffirming its 2026 targets of 25 MW deployed and more than $50M in revenue, while Flexsteel Industries gained 11% after beating FQ4 earnings and revenue estimates and providing above-consensus Q1 sales guidance. Klarna fell 21% after issuing weaker-than-expected Q3 and full-year guidance, citing lower German volumes, FX headwinds, and changes to fair financing accounting, while Fabrinet dropped 18% despite a strong FQ4 beat and above-consensus Q1 guidance. Kulicke & Soffa slid 10% after naming Raj Talluri as President and CEO, and Baidu fell 9% after Q2 revenue and adjusted EPS missed estimates, with online marketing revenue declining 19% and total revenue falling 4% year-over-year to RMB31.3B.

Fabrinet shares fell 8.6% in pre-market trading on Tuesday after investors focused on weaker margins, negative free cash flow, and a softer near-term profit outlook despite stronger-than-expected fiscal fourth-quarter 2026 revenue and earnings. Revenue reached $1.316 billion, ahead of the consensus estimate of approximately $1.27 billion, and non-GAAP earnings per share came in at $4.10, beating the $3.81 forecast by more than 7%. Gross margin declined by 30 basis points year-over-year, and free cash flow turned negative at -$37 million, largely due to increased capital expenditure for capacity expansion in Thailand and California. Management's guidance for the first quarter of fiscal 2027 implies a revenue midpoint of $1.405 billion, above Wall Street consensus, but indicates a sequential decline in earnings per share due to seasonal factors. The company also cited uncertainty surrounding Thailand's new top-up tax regime and continuing component supply constraints as potential challenges, while broader market weakness, with the NASDAQ down 1.0% and the S&P 500 down 0.4%, amplified the negative reaction.

Coherent's recent post-earnings correction has made the stock a more compelling investment opportunity. The company delivered a strong quarterly performance, raised its outlook, and highlighted record backlog visibility extending through 2028, while reaffirming that fiscal 2027 growth is expected to exceed fiscal 2026 levels. Despite a 19% decline over the past month, the stock remains up 218% over the past year, and the pullback has brought its forward 12-month price-to-earnings ratio of 36.29 times closer to the industry average of 20.89 times. The Zacks Consensus Estimate for 2026 earnings is $5.47 per share, indicating 55% year-over-year growth, with revenues expected to reach $7.06 billion, up 21.5%. Coherent continues to outperform optical networking peers Lumentum and Fabrinet, benefiting from stronger AI infrastructure exposure and expanding production capacity, and currently holds a Zacks Rank of 1, or Strong Buy.

Fabrinet shares have surged more than 100% over the past year, driven by AI-related demand, but the stock now trades at a forward 12-month price-to-earnings ratio of 32.98 times, a premium to the Zacks Computer and Technology sector's 25.1 times and above peers Microchip Technology at 30.87 times and TE Connectivity at 17.73 times. The company projects fiscal fourth-quarter 2026 revenues between $1.25 billion and $1.29 billion, supported by its Optical Communications and non-optical communications segments, and ended the third quarter with $945.9 million in cash and no debt. However, datacom supply constraints caused a 6% sequential revenue decline in the fiscal third quarter, and management expects component and material shortages to persist, while foreign exchange volatility added a $7 million revaluation gain in the quarter after a $3 million loss in the prior period. Zacks Investment Research rates Fabrinet a Hold, suggesting existing shareholders maintain their positions while prospective investors wait for a more favorable entry point.