Raymond James analyst Brian Alexander this morning raised his rating on Avnet (AVT) to Outperform from Market Perform, setting a $33 price target on the stock. He contends that recent sizable acquisitions by the electronics distribution giant, including the just-completed purchase of Bell Micro,� “will provide a needed cushion to estimates in the face of a cyclical slowdown,” and adds that historical evidence suggests the stock can outperform during periods of decelerating organic growth. He also notes that the stock has hit “near-trough valuation metrics.”
He notes that the stock trades for just 8x his estimate for next 12 months EPS, in line with the trough P/E of the last three cycles.
He says consensus EPS estimates likely need to come down to adjust for moderating demand in Europe, a lower Euro/dollar exchange rate and potential double ordering, but adds that those factors should be offset by accretion from recent acquisitions. “With investors seemingly bracing for estimate cuts across the tech supply chain, we believe Avnet�s estimates will hold up relatively well and attract shareholder interest,” he writes. “We also note that despite growing concerns about a semiconductor cycle correction, Avnet�s stock has historically outperformed peers and market indices in cyclical slowdowns, in part due to its diversified revenue mix and countercyclical cash flow characteristics.”
AVT is up 23 cents, or 0.9%, to $25.35.
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