(Bloomberg) — Hon Hai Precision Industry Co. Ltd.'s stock posted its biggest intraday gain in more than three years after the company predicted strong growth in AI hardware sales this year.
Most Read Articles on Bloomberg
The Taiwanese company expects its artificial intelligence server business to grow 40% this year and is targeting a 40% share of the overall market, Chairman Young Liu said during an earnings call on Thursday. The company, also known as Foxconn, reported strong profit increases for the second straight quarter as favorable AI hardware sales offset weak demand for iPhones and consumer electronics.
Shares in Taipei rose as much as 9.5% on Friday, extending their gains since the start of the year on growing optimism about Foxconn's opportunity to benefit from AI demand. Apple Inc., the world's largest iPhone assembler, was not among the initial group of companies boosted by the AI frenzy, but investors and analysts say its market share is likely to grow. I'm looking at it. This month, it was reported that the company had won a major order from long-time US partner Hewlett Packard Enterprise.
Morgan Stanley, Citigroup and UBS Group raised their price targets on the company after the company posted a 33% jump in net profit to NT$53.2 billion ($1.7 billion) in the quarter ended December.
“The company's competitive edge in providing total solutions (including liquid cooling and switches) through vertical integration positions it well for further project success,” Citi analysts Carrie Liu and Michael Han said after the results. Probably.''
Hon Hai had expected sales to decline again this quarter as the company is coming off a comparative rise from the post-pandemic recovery period early last year. AI sales helped Foxconn improve profits while weathering a slump in its flagship product, the iPhone, which first brought it global fame.
Robert Lee, an analyst at Bloomberg Intelligence, said, “While we saw a strong recovery in the fourth quarter due in part to the emphasis on AI, if we take a step back and look at 2023 as a whole, it will be a relatively weak year. ” he said. “The company should have a much better year as its major customers begin to rebuild their inventory.”
JPMorgan said earlier this week that Foxconn's bull run could be prolonged as the market increasingly bets on the company's prospects in AI server infrastructure starting in the second half of this year. Analysts including Gokul Hariharan estimate that Hon Hai's AI sales and gross profit exposure are likely to be in the 10-12% range in 2025.
Still, challenges remain as Apple accounts for more than half of Hon Hai's sales. Counterpoint Research announced this month that iPhone sales in China fell an astonishing 24% in the first six weeks of this year. To stimulate demand, Apple even rolled out rare discounts on its web store in January, with online resellers currently offering discounts of up to $180.
–With assistance from Abhishek Vishnoi.
(Updates analyst reactions and charts)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
