Buy Soaring Tech Stock FN Before Earnings for AI Growth?
FN
stock has skyrocketed 95% since early April to trade at all-time highs heading into its fourth-quarter fiscal 2025 earnings release on Monday, August 18.
FN helps big tech companies, including Nvidia, by making small, precision parts used across AI data centers, telecom, and beyond. Artificial intelligence powerhouse Nvidia is one of Fabrinet's largest clients, and it's growing its relationship with Amazon.
The leading provider of advanced optical packaging tripled the Tech sector over the last 15 years as Wall Street gravitated toward Fabrinet's steady top-line growth in a critical, behind-the-scenes industry.
The Bull Case for Under-the-Radar Tech Stock FN
Fabrinet's portfolio enables other tech companies to make the small, complex parts they need for their products. In technical terms, FN is a leader in advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services for original equipment manufacturers of complex products.
More broadly, FN is a behind-the-scenes technology standout growing more critical by the day as AI hyperscalers and others race to build more data centers. For instance, some of Fabrinet's technologies play critical roles in sending information at lightning speeds in data centers, enabling AI programs to run smoothly.
The company said earlier this year that demand for its datacenter interconnect products is strong and it's confident in the long-term upside across Fabrinet's datacom segment. FN averaged 13% revenue growth in the past five years. More importantly, its GAAP earnings exploded to the tune of 28% average expansion in the last four years.
Nvidia
NVDA
is one of Fabrinet's largest clients, with the graphics chip powerhouse reportedly accounting for roughly 35% of Fabrinet's FY24 revenue. Fabrinet manufactures critical optical components and networking cables for NVIDIA's AI data center operations, including high-speed transceivers and interconnects used in AI clusters.
Networking equipment giant Cisco Systems and optical components standout Lumentum are two of FN's other most important clients. On top of all that, Fabrinet and Amazon
AMZN
entered into an agreement in March for Amazon to buy warrants to purchase up to 381,922 shares of Fabrinet at $208.4826 per share. The deal incentivizes Fabrinet to deepen its role within Amazon's supply chain to help support the growth of AMZN's AI infrastructure.
Fabrinet's direct connection to Nvidia and Amazon should help support long-term growth as both companies fuel the AI arms race. Plus, Fabrinet is a well-run company with a stellar balance sheet, holding more cash and equivalents ($951 million) than total liabilities ($712 million).
Looking ahead, Fabrinet is projected to grow its FY25 (period ending in June 2025) revenue by 18% and 17% in FY26, reaching $3.95 billion—up from $2.88 billion in FY24.
The company's consensus earnings estimates have jumped since its Q3 FY25 release, helping FN earn a Zacks Rank #2 (Buy). Fabrinet is expected to grow its adjusted earnings by 15% in FY25 and 18% in FY26.
Buy Tech Stock FN Before Earnings, Or Wait for a Pullback?
Fabrinet stock more than tripled the Zacks Tech sector over the last 15 years, soaring 2,660%. This run includes a 1,650% charge over the past 10 years to blow away Tech's 375% and Amazon's 745%.
Image Source: Zacks Investment Research
The stock has soared alongside the market, charging nearly 100% higher off its April lows to trade right near its recent peaks. The run took Fabrinet from some of its most oversold RSI levels over the past decade to some of its most overbought.
FN appears rather overheated in the short run and due to possibly test its 21-week moving average. The stock is also trading at an all-time high at 32X forward 12-month earnings.
This backdrop means that some investors might want to wait for Fabrinet's next pullback before they buy the behind-the-scenes AI stock. Others could decide to dive in as the bulls drive the stock market higher, and buy more FN stock the next time it fades.
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