3 Stocks to Buy From a Prospering Electronics Components Industry

The Zacks Electronics - Miscellaneous Components industry participants are benefiting from the ongoing automation drive and increased spending by manufacturers of semiconductors, automobiles, machinery and mobile phones. Industry participants like TE Connectivity TEL, Fabrinet FN and TTM Technologies TTMI are well-poised to benefit from the solid adoption of AI and the democratization of IoT, which are transforming robotics, industrial automation, transportation systems, retail and healthcare. However, a challenging global macroeconomic environment, end-market volatility and higher tariffs are headwinds. Export restrictions imposed by the United States, as well as China, are a major headwind. Growing geopolitical tensions and foreign currency headwinds are taking a toll on the industry players. 

Industry Description

The Zacks Electronics - Miscellaneous Components industry primarily comprises companies providing various accessories and parts used in electronic products. The industry participants’ offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, and advanced medical solutions. They cater to varied end markets, such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems and consumer electronics. Customers in this industry are mainly original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.

3 Trends Shaping the Future of Electronics - Miscellaneous Components Industry

Automation Boom a Tailwind: The requirement for faster, more powerful and energy-efficient electronics leads to increased automation. Control systems, such as computers, and robots and information technologies for handling different processes and machinery, are driving the industry. The growing installation of collaborative robots, which add efficiency to production processes by working with production workers, will benefit industry participants. IoT-supported factory automation solutions are other contributing factors. The evolution of smart cars and autonomous vehicles is expected to drive growth for the industry.

Miniaturization Remains a Key Lever: The industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging, enabling the miniaturization of electronic products, remains strong. The consistent shift to smaller dimensions, the rapid adoption of device architectures like FinFET transistors and 3D-NAND, and the increasing utilization of new manufacturing materials to increase transistor and bit density are driving the demand for solutions provided by industry players.

Geopolitical Tensions Are Worrisome: Tariffs and the souring relationship between the United States and China are headwinds. Increasing dependency on AI-backed electronic devices on semiconductors and current restrictions ordered by the United States on trading with China, which remains the main hub for chip production, is a significant negative for the industry.

Zacks Industry Rank Indicates Bullish Prospects

The Zacks Electronics - Miscellaneous Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #37, which places it in the top 15% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since June 30, 2025, the industry’s earnings estimates for the current year have moved up 13%.

Given the bullish prospects, there are a number of stocks that investors can choose to pick for a healthy portfolio. However, before we present the stocks, let us look at the industry’s recent stock-market performance and the valuation picture.

Industry Beats S&P 500, Sector

The Zacks Electronics - Miscellaneous Components industry has outperformed the Zacks S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.

The industry has appreciated 58.6% over this period compared with the S&P 500’s return of 17.7% and the broader sector’s 23.7%.

One-Year Price Performance

Industry's Current Valuation

Based on the forward 12-month price to earnings (P/E), a commonly used multiple for valuing electronics – miscellaneous components stocks, the industry is currently trading at 23.68X compared with the S&P 500’s 23.08X and the sector’s 26.25X.

In the past five years, the industry has traded as high as 24.51X and as low as 17.04X, with a median of 22.37X, depicted in the charts below.

Forward 12-Month Price-to-Earnings (P/E) Ratio

 

3 Electronics - Miscellaneous Components Stocks to Buy

TE Connectivity: This Zacks Rank #1 (Strong Buy) stock is expected to benefit from strong demand for its solutions in the AI and cloud domains. You can see the complete list of today’s Zacks #1 Rank stocks here.

TEL is benefiting from growth in its Digital Data Networks business, which includes AI-related revenue, and grew 70% year-over-year.  AI revenues are now expected to be a couple of hundred million dollars higher than previously forecasted for fiscal 2026. TEL expects fiscal second-quarter net sales to increase 13% year over year to $4.7 billion.

TE Connectivity shares have appreciated 54.1% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2026 earnings has increased 3.5% to $10.93 per share in the past 30 days.

Price and Consensus: TEL

 

Fabrinet: This Zacks Rank #1 company is benefiting from strong telecom demand, including robust DCI module growth, ongoing datacom momentum and continued growth in HPC. Expanding capacity driven by the construction of Building 10 and the creation of additional manufacturing space at the Pinehurst campus is expected to drive FN’s prospects in 2026. 

For the third quarter of fiscal 2026, revenues are expected between $1.15 billion and $1.2 billion, indicating 35% year-over-year growth at the midpoint. Non-GAAP earnings are expected between $3.45 per share and $3.60 per share, suggesting 40% year-over-year growth at the midpoint. 

Fabrinet shares have returned 120.7% in the past year. The Zacks Consensus Estimate for FN’s fiscal 2026 earnings has been revised upward by 2.2% to $13.58 per share over the past 30 days.

Price and Consensus: FN

 

Price and Consensus: TTMI

 

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TE Connectivity Ltd. (TEL): Free Stock Analysis Report
 
TTM Technologies, Inc. (TTMI): Free Stock Analysis Report
 
Fabrinet (FN): Free Stock Analysis Report

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

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