TD Cowen analyst Joseph C. Giordano lifted the price target on Amphenol (NYSE:APH) stock and raised his model estimates, while maintaining a Hold rating. The five-star analyst raised the price target from $90 to $115, which implies a massive 71.1% upside potential from current levels. His optimism stems from the anticipated artificial intelligence (AI)-led revenues.
Amphenol is a constituent of the S&P 500 (SPX) index. The Connecticut-based company is one of the largest manufacturers of high-end interconnectors, sensors, and antennas. Its products are used in several diverse end markets, including automotive, information technology, data centers, mobile devices, broadband communications, commercial aerospace, and defense.
Amphenol has consistently outpaced analysts’ expectations for both earnings and revenue in the past several quarters. The company’s exposure to dynamic end markets enables it to innovate and deliver consistently. Importantly, the increasing focus on AI-led end markets is expected to boost the company’s growth prospects in the years ahead. Amphenol follows a dual strategy of organic innovation and strategic acquisitions to enhance its offerings.
Giordano Sees Huge Upside from AI
Giordano expects Amphenol to benefit massively from AI. The analyst noted that currently, estimated AI revenue stands at roughly $800 million on an annualized basis and is expected to reach approximately $1 billion in Fiscal 2025. This growth is expected to be driven by Amphenol’s Information Technology and Data Communications (IT Datacom) end market, which is included in all three reporting segments of the company’s net sales breakup. Accordingly, Giordano has made adjustments to his financial model to reflect the growing revenues from IT Datacom.
Some of the catalysts that Giordano lists for Amphenol include forthcoming merger and acquisition announcements, global recovery in demand for electric vehicles (EVs), the introduction of smarter mobile phones and wearables, and a huge increase in hyperscale data centers. Despite these positives, the analyst remains on the sidelines due to valuation concerns.
The analyst’s revised price target (115) for APH shares is based on an EV/EBITDA (enterprise value to earnings before interest tax depreciation and amortization for FY24) multiple of 22x and a P/E (price to earnings per share for FY24) multiple of 33.8x.
Giordano’s Ranking on TipRanks
Giordano ranks #534 among more than 8,800 analysts on TipRanks. With an impressive success rate of 67%, Giordano has achieved an average return per rating of 10.60%.
Is Amphenol a Good Stock?
Other than Giordano, two more analysts have a Hold rating on APH stock. The remaining ten analysts that recently rated APH shares have given it a Buy recommendation. Based on these, APH stock has a Strong Buy consensus rating on TipRanks. Also, the average Amphenol price target of $136.75 implies an attractive 103.5% upside potential from current levels. In the past year, APH shares have declined 15.6%.
Ending Thoughts
Amphenol has the right recipe to boost its revenues, while it is already managing its expenses efficiently and growing its margins. Giordano is optimistic that greater emphasis on AI revenues will benefit Amphenol in the long run. What’s more, Amphenol pays a regular quarterly dividend of $0.22 per share and continues to undertake share buybacks to reward shareholders, making it a compelling investment opportunity.
