Amphenol stock momentum tied to AI data center demand, says Citi

EditorEmilio Ghigini
Published 01/17/2025, 06:22 PM
APH
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On Friday, Citi analysts adjusted their outlook on Amphenol stock (NYSE:APH), raising the price target slightly to $82 from $81, while reiterating a Buy rating on the shares. The electronic equipment giant, with its impressive market capitalization of $84.2 billion, has delivered a remarkable 47.8% return over the past year.

According to InvestingPro analysis, the stock currently trades above its Fair Value, reflecting strong market confidence in its growth prospects. The firm's analysts highlighted ongoing optimism in the connector market, which is anticipated to maintain its momentum into 2025 after experiencing mid-single digit growth in 2024. This positive trajectory is supported by a robust book-to-bill ratio.

The strength in the IT Datacom sector is a key driver for the market's growth, spurred by increasing demand for artificial intelligence and rising cloud capital expenditure expectations. Despite mixed performance in industrial markets, with weaker automation trends in Europe, there has been noted strength in the medical, defense, and energy sectors.

This diverse market presence has contributed to Amphenol's solid 14.2% revenue growth over the last twelve months, with the company maintaining a healthy gross profit margin of 33.6%. Conversely, automotive demand, particularly in Europe, continues to be lackluster.

Amphenol has faced recent challenges, including shipment delays for Blackwell/GB200, which have been a concern for investors. However, Citi analysts believe these issues to be temporary, tied to the ramp-up of newer, more complex systems. They remain positive on the demand for data center connectors, noting that AI servers require significantly more content than mainstream systems.

The analysts underscored their preference for Amphenol over competitors like TEL due to its leading market share in AI/data centers, with 33% exposure to the IT/Datacenters segment. Amphenol's successful track record in accretive mergers and acquisitions, along with its execution capabilities, were also highlighted as reasons for the favorable rating.

With its next earnings report due on January 22, 2025, investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro's detailed research reports, which transform complex financial data into actionable intelligence.

In other recent news, Amphenol Corporation (NYSE:APH) has successfully issued $1.5 billion in senior notes, with net proceeds intended to finance the acquisition of CommScope Holding (NASDAQ:COMM) Company, Inc.'s Outdoor Wireless Networks segment and Distributed Antenna Systems business.

The senior notes were offered through an underwriting agreement with Barclays (LON:BARC) Capital Inc., BNP Paribas (OTC:BNPQY) Securities Corp., BofA Securities, Inc., and HSBC Securities (USA) Inc. Additionally, Amphenol Corporation's Board of Directors has approved a fourth quarter dividend of $0.165 per share.

In recent developments, Amphenol has reported impressive Q3 results with sales of $4.39 billion, marking a 26% increase year-over-year, and earnings per share (EPS) of $0.50. Truist Securities and BofA Securities responded positively to these developments, raising the stock price target for Amphenol to $82.00 and $74.00 respectively. TD Cowen also maintained its Hold rating on the stock, acknowledging Amphenol's sustained organic growth and solid booking-to-billing ratios.

BofA Securities has adjusted its price target for Amphenol Corporation to $74.00 from the previous $70.00 while maintaining a neutral rating on the shares. The firm noted the company's operating margin at 21.9%, an increase of 110 basis points year-over-year, and 60 basis points sequentially. Finally, the firm's estimates now incorporate the impact of the Andrew acquisition, which is expected to commence in the second quarter of 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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