Fabrinet (NYSE:FN) shares plunged more than 23% Tuesday after the company's third-quarter guidance disappointed investors.
In the second quarter, the company posted earnings of $2.08 per share, $0.05 better than the analyst estimate of $2.03 per share. Revenue for the quarter came in at $712.7 million versus the consensus estimate of $696.32 million.
CEO Seamus Grady said the company's results represented record levels for revenue and net income per share, driven by continued strong datacom revenue growth.
"We remain confident that newer datacom programs will significantly contribute to our results as we look ahead," he commented. "With continued business momentum, we are well-positioned to extend our track record of strong execution into the third quarter."
Looking ahead, Fabrinet sees its Q3 2024 EPS between $2.08 and $2.15, versus the consensus of $2.11, with revenue for the period from $705 million to $725 million, versus the consensus of $718.4 million.
In addition, the company offered guidance implying single-digit growth in its AI Data Comm sales, according to analysts, who described it as "squishy."
"The guidance implies 6%-7% AI Q-Q growth in the March quarter, where the Street was expecting 15%+. As a result, the stock is getting hit post-print," analysts explained.
Analysts downgraded the stock to Market Perform from Outperform, maintaining its $200 price target "post the company's upside FQ224 report and outlook for slowing seq growth in AI Datacom revs, exacerbated by the transfer of legacy 100G INTC module revs."
"While Telecom was stronger in FQ2 and expected to grow seq in FQ3 driven by 400ZR DCI revs, also AI-driven, given recent strength in the shares and premium valuation metrics, we move to the sidelines despite initiating FY25 ests calling for double-digit growth," they wrote.