Fabrinet Appreciates 74% YTD: Should You Buy, Sell, or Hold the Stock?

Fabrinet FN shares have appreciated 74.3% year to date (YTD), outpacing the Zacks Electronics – Miscellaneous Components industry’s advance of 38.9% and the Zacks Computer and Technology sector’s return of 19.8%. The surge has been supported by strong momentum in telecom and Data Center Interconnect (DCI) products, alongside the ramp of 1.6-terabit transceivers. Fabrinet shares have outperformed peers like Jabil JBL and Coherent COHR, which are up 55.9% and 15.2% YTD, respectively, though they trail Celestica CLS, which has surged 174%.

Fabrinet’s YTD Performance

Fabrinet shares are trading above their 50-day and 200-day moving averages, indicating a bullish trend.

Fabrinet Stock Trades Above the 50-Day and 200-Day SMAs

With technicals pointing to sustained momentum and shares rallying sharply YTD, let’s delve deeper to find out what investors should do.

Portfolio Diversification Drives Sustained Growth Momentum

Fabrinet's fourth-quarter fiscal 2025 performance demonstrates how strategic portfolio evolution positions the company for sustained growth and expansion. Optical communications revenue increased 15% year over year to $689.92 million, showcasing balanced growth between telecom operations ($436.80 million) and datacom operations ($253.12 million). Non-optical communications contributed $231 million, representing 41% year-over-year growth through automotive and industrial laser applications.

The product portfolio's evolution toward next-generation technologies underpins growth acceleration. DCI products, now generating $107 million quarterly with 45% year-over-year growth, capitalize directly on artificial intelligence infrastructure buildouts. The transition to higher-speed optical products proves particularly compelling, with 800-gigabit and faster products achieving $313 million in revenues, up 32% sequentially. Volume production of 1.6-terabit transceivers positions Fabrinet at the technological frontier, providing competitive differentiation as customers migrate to higher bandwidth solutions.

Strategic portfolio expansion through the Amazon Web Services partnership for high-performance computing applications represents deliberate market diversification. Fabrinet's establishment of a dedicated reporting segment signals confidence in this opportunity's scalability. Combined with Building 10's 2 million square foot capacity expansion, these initiatives demonstrate proactive portfolio positioning to capture emerging demand across optical communications, data center connectivity and high-performance computing markets. This multi-pronged approach reduces dependency on any single product category while maintaining exposure to secular growth trends in data infrastructure.

Q1 Fiscal 2026 Guidance Highlights Constraints

For the first quarter of fiscal 2026, Fabrinet expects revenues between $910 million and $950 million. At the midpoint of the projected range, revenues are expected to increase 24% year over year, but only 2% sequentially from the June quarter’s $910 million, reflecting near-term supply constraints. The Zacks Consensus Estimate for revenues is pegged at $936.17 million, indicating modest 16.41% year-over-year growth.

Fabrinet projects non-GAAP earnings of $2.75-$2.90 per share. The outlook factors in margin headwinds of 10-20 basis points from annual compensation resets and inefficiencies tied to multiple new program ramps. The Zacks Consensus Estimate for earnings is pegged at $2.83 per share, unchanged over the past 30 days, suggesting 18.41% year-over-year growth.

Performance in the near term is expected to be constrained by shortages of 200-gigabit per lane externally modulated lasers, which are critical for both 800G and 1.6T transceiver production. These shortages are likely to pressure datacom revenues sequentially despite healthy end-market demand.

Fabrinet Price and Consensus

Fabrinet price-consensus-chart | Fabrinet Quote

Fabrinet Shares Are Overvalued

Fabrinet shares are overvalued as indicated by a Value Score of D. The stock trades at 31.74X forward 12-month earnings, above the Zacks Electronics – Miscellaneous Components industry’s 22.74X and the Zacks Computer and Technology sector’s 29.52X.

Among peers, Jabil trades at 21.43X and Coherent at 26.61X, both at meaningful discounts to Fabrinet. Celestica, at 43.03X, remains the clear outlier in the group as investors assign a higher premium for its deeper leverage to artificial intelligence programs. Fabrinet’s own multiple, amplified by a 74% YTD rally, already reflects the strong demand trends in optical communications and data center interconnect. The shares now appear stretched relative to Jabil and Coherent and lack the same breadth of AI exposure that supports Celestica’s higher valuation.

Fabrinet Stock's Valuation

Conclusion

Fabrinet’s diversified portfolio and strength in next-generation optics support its long-term prospects. However, first-quarter fiscal 2026 guidance reflects component shortages and margin pressure that may limit near-term performance.
After a 74% year-to-date rally, much of the upside from optical ramps and data center interconnect demand already appears captured in the valuation. Trading at a premium to the industry and the sector, the stock does not offer an attractive entry point at current levels.

Fabrinet currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favourable point to accumulate the stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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