Monday, December 13, 2021

An International Equity holding: Fabrinet (FN, $120.97): “Fabrinet Creator of New Chips” By: Kevin Igoe, AIM Student at Marquette University

 Fabrinet (FN, $120.97): “Fabrinet Creator of New Chips”

By: Kevin Igoe, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


Fabrinet. (NYSE: FN) is an international information technology company that engages in the provision of optical packaging and electronic manufacturing services to original equipment manufacturers.   

• Fabrinet receives Cisco 2021 EMS partner of the year award for battling through a challenging operational and commercial climate through 2021 while continuing to perform tremendously and be a good partner. 

• Fabrinet selected by Aeva to produce the worlds first 4D LiDAR Chip Module using automated driving and beyond using silicon photonics technology.   

• Recently hit a new 52 week high of $122.53 on November 8, 2021. 

• Subject to risks of current ongoing U.S. China Trade dispute which could have negative effect on 2022 financial conditions and operating results. 

Key points:

CEO Seamus Grady announced their Covid-19 vaccination program for Thailand employees has been a great success and now almost 99% of employees have been vaccinated.  This is important because in July 2021 this effort went underway as many facilities were forced to shut down due to outbreaks increasing their cost of revenue for the year. 

Fabrinet President and COO recently sold recently sold 2.5 million of his Fabrinet stock decreasing their holding size by roughly 29%.  This is making shareholders cautious but there is no need to worry because Fabrinet is increasingly growing profits year over year.    

Fabrinet plans to emphasis their growth strategy more moving forward as a firm their growth strategy includes strengthening their presence in the optical communications market, continuing to expand their customized optics and glass vertical integrations, and evaluating strategic acquisitions. 

Moving forward they plan to continue to establish New Product Introduction (NPI) centers to generate and transfer new business to their Thailand operations.  Like the recently opened NPI in Silicon Valley they want to expand these to help generate more business to be available for transfers to Thailand. 

What has the stock done lately?

Throughout the last month Fabrinet has increased an impressive 17.24% being up $17.53 coming towards the end of 2021.  Which was in part due to announcements made in the FY 21 Q4 earning reports such as revenue of 509.6 million was earned which was more than forecasted for this quarter also their non-GAAP EPS was $1.31 above their forecasted numbers for this quarter. 

Past Year Performance: Fabrinet has increased 53.65% in value over the past year.  Up a total of $41.70 due to major increases in revenues, gross profit, and operating income respectively going up by 237.5 million, 35.3 million, and 33.4 million.  Proving to shareholders Fabrinet is continually growing on a year-over-year basis.    

Source: FactSet

My Takeaway

This new opportunity for Fabrinet to help Aeva manufacture the worlds first 4D LiDAR chip module shows shareholders they hold the ability to tap into this new market ahead of their competitors.  Aeva’s decision to use Fabrinet to help produce these also emphasizes how Fabrinet is ahead of its competitors in respect to their deep expertise in silicon photonics integrated devices and advanced optical systems.