B.Riley Downgrades Fabrinet (FN) to Sell

B.Riley analyst Dave Kang downgraded Fabrinet (NYSE: FN) from Neutral to Sell with a price target of $178.00 (from $194.00).

The analyst comments: "We downgrade Fabritent from Neutral to Sell, as we believe the trend of unbundling NVIDIA's (NVDA) GPU platforms will adversely impact FN's optics business. We lower the PT from $194 to $178, based on a cash-adj. P/E multiple of 16x (17x previously) our FY26 EPS estimate. Thus far, Amazon (AMZN), Microsoft (MSFT), and Meta (META) have been buying NVDA's GPU platforms, such as HGX H100, that contain other components, including optics. These optics are supplied by FN (CM for Mellanox), Coherent (COHR — Neutral, $86 PT) and InnoLight. Alphabet (GOOGL) was the lone exception, as they typically bought only NVDA's GPUs and made their own platforms. We believe these 3 hyperscalers are by far the largest customers of NVDA. NVDA integrates these optics into their GPU platforms, and sells them to their customers. However, our latest checks indicate AMZN is about to change their purchasing model to buy just NVDA's GPUs, and make their own platforms. This won't impact NVDA's GPU business, but will impact NVDA's optics business since it is about to lose one a major customer in AMZN. This unbundling trend could threaten FN's optics business, since we believe it's just a matter of time before MSFT and META follow their competitors' footsteps. After all, these hyperscalers have their own GPUs and other necessary products/technologies."

For an analyst ratings summary and ratings history on Fabrinet click here. For more ratings news on Fabrinet click here.

Shares of Fabrinet closed at $248.74 yesterday.

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