Last Update 11 Jan 26

AVT: Cyclical Stabilization And Buybacks Will Support Mixed Margin Outlook

Analysts have increased their price target on Avnet by $1 to $55, citing recent Q3 upside, mixed Q4 guidance, and signs of cyclical stabilization, even as revenue strength has been slow to translate into margins and AI exposure remains limited.

Analyst Commentary

Bullish Takeaways

Bullish analysts see the raised price target to $55 as a sign that recent Q3 upside is at least partly reflected in expectations, even if ratings stay neutral.
Q3 upside suggests the company is still executing on revenue, which supports the view that demand has not fallen off sharply despite mixed Q4 guidance.
Management comments about signs of cyclical stabilization give some investors confidence that current earnings power may be more resilient than headline volatility suggests.
Limited AI exposure is seen by some as a risk reducer in a part of the market that can carry higher expectations and more volatility.

Bearish Takeaways

Bearish analysts highlight that the rating remains at Hold, which signals that the higher target is not being matched with higher conviction on upside from current levels.
The mixed Q4 outlook raises questions about how consistent the recent Q3 upside will be. This can cap near term growth expectations.
Revenue strength is having a hard time flowing through to margins, largely due to geographic mix, which can limit earnings leverage even if sales remain solid.
Limited AI exposure is also viewed as a missed opportunity for growth, with some analysts pointing to broader manufacturing indicators such as PMIs as another factor that would need to recover to support a stronger earnings profile.

What's in the News

Navitas Semiconductor expanded its distribution agreement with Avnet as part of consolidating its franchised distribution partners, giving Navitas a broader channel presence with one of the world's largest electronic component distributors and building on Avnet Silica's reach in Europe (Key Developments).
Under the expanded partnership, Avnet will provide technical and commercial support for Navitas' GaN and SiC high voltage and high power wide bandgap semiconductor devices, aimed at end markets such as AI data centers, high performance computing, renewable energy, grid infrastructure, and industrial electrification (Key Developments).
Avnet reported that from June 29, 2025 to September 27, 2025, it repurchased 2,646,156 shares for US$138.31 million, and since June 6, 2022 it has completed the repurchase of 18,525,241 shares for US$886 million under its buyback program (Key Developments).
For the second quarter of fiscal 2026 ending December 27, 2025, Avnet issued sales guidance of US$5.85 billion to US$6.15 billion and GAAP diluted EPS guidance of US$0.74 to US$0.92 (Key Developments).

Valuation Changes

Fair Value: held steady at US$53.00 per share, indicating no change in the central value estimate.
Discount Rate: nudged slightly lower from 10.67% to 10.62%, a modest adjustment to the required return assumption.
Revenue Growth: remains essentially unchanged at about 5.87%, suggesting no revision to the top line growth outlook used in the model.
Net Profit Margin: stays effectively flat at about 2.55%, with no material shift in assumed earnings efficiency.
Future P/E: edges slightly lower from 7.08x to 7.07x, reflecting a very small change in the valuation multiple applied to forward earnings.

Avnet's investments in digital platforms and e-commerce are boosting customer retention and positioning the company to gain market share in fast-growing tech sectors.
Geographic and sector diversification, plus value-added services amid supply chain shifts, enhances earnings stability and margin potential as industry conditions improve.
Margin pressure from regional sales shifts, weak EMEA demand, and rising costs threaten Avnet's profitability, balance sheet health, and ability to drive earnings growth.

Catalysts

About Avnet

Distributes electronic component technology.What are the underlying business or industry changes driving this perspective?

Recovery in global demand, led by robust 18% year-over-year growth in Asia and improving bookings/backlog across all regions, positions Avnet to benefit from accelerating digitalization, IoT adoption, and increased demand for electronic components; this should support top-line revenue growth as industry inventory normalization signals an inflection point.
Expanded investment in digital infrastructure, proprietary customer platforms, and improved e-commerce capabilities-particularly at Farnell-strengthen customer experience and retention, enhancing Avnet's ability to capture market share in high-growth sectors (cloud/AI, industrial automation, EVs); this is expected to drive higher-margin recurring revenues and operating leverage.
Increasing market complexity and supply chain challenges are driving OEMs and customers to rely more on technically adept, authorized distributors like Avnet for design and engineering value-add, which supports stable or improving net margins through premium services and stickier customer relationships.
Ongoing geographic expansion, notably the double-digit sustained growth in Asia and the strategic focus on reigniting growth in EMEA, diversifies revenue sources and reduces regional concentration risk, creating greater earnings stability and upside potential as Western markets recover.
With improving book-to-bill ratios, a stabilizing inventory environment, and a strong commitment to operational efficiency (cost control and optimized capital allocation), Avnet is set to translate industry tailwinds into higher earnings and cash flow, supporting future shareholder returns through buybacks/dividends and potential multiple expansion.

Avnet Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Avnet's revenue will grow by 4.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 1.1% today to 2.7% in 3 years time.
Analysts expect earnings to reach $680.5 million (and earnings per share of $8.14) by about September 2028, up from $240.2 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.5x on those 2028 earnings, down from 18.5x today. This future PE is lower than the current PE for the US Electronic industry at 23.9x.
Analysts expect the number of shares outstanding to decline by 4.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.96%, as per the Simply Wall St company report.

Avnet Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The rapid growth of Asian sales as a share of overall revenue puts significant downward pressure on Avnet's blended gross margins, and given the structurally lower margin profile in Asia compared to EMEA and the Americas, this trend could result in sustained lower net margins and earnings if regional demand imbalances persist.
Persistent demand weakness in EMEA, which experienced a 21% year-over-year sales decline (in constant currency) and only modest recovery signs, increases Avnet's risk of prolonged underperformance in a historically profitable region and contributes to operating margin volatility at the company level.
Ongoing margin compression, reflected by a 99 basis point year-over-year decline in gross margin (to 10.6%), is attributable to both adverse product/customer mix and regional sales shifts, and may be exacerbated by further commoditization of Avnet's core distribution services, undermining long-term profitability.
Elevated inventory levels-despite reductions-still require active management, tying up significant working capital and exposing Avnet to further risk of inventory writedowns if end-market demand fails to recover as anticipated, directly impacting future cash flows and balance sheet health.
Increased operating expense headwinds are expected in fiscal 2026 due to reinstated merit pay and inflationary pressures, which could limit operating leverage and hinder earnings growth if revenue recovery is slower than forecasted, especially in cyclical or underperforming regions.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $52.75 for Avnet based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $64.0, and the most bearish reporting a price target of just $43.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $25.5 billion, earnings will come to $680.5 million, and it would be trading on a PE ratio of 7.5x, assuming you use a discount rate of 10.0%.
Given the current share price of $53.13, the analyst price target of $52.75 is 0.7% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Cyclical Stabilization And Asia Momentum Will Support Measured Upside Ahead