Are You Missing the Boat on This AI Stock That's Up 104% This Year?
Written by Dave Kovaleski for The Motley Fool -> Arrow Electronics stock has returned 104% YTD. The stock is trading at just 11 times forward earnings. It still looks like a good buy at this low valuation. One of the breakout tech stocks this year has gone largely unnoticed,
One of the breakout tech stocks this year has gone largely unnoticed, certainly compared to the "Magnificent Seven" and other artificial intelligence (AI) stock juggernauts. Yet Arrow Electronics (NYSE: ARW) has outperformed most of them, with a 104% year-to-date (YTD) return at the time of this writing.
Is it too late to buy Arrow, an electronics distributor that provides the components to support the AI boom -- or does it have more room to run?
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Arrow Electronics is an electronics distributor and consultancy that distributes semiconductor chips and components. The components are used in AI-enabled systems and devices across the automotive, medical devices, data centers, and aerospace and defense industries, as well as robotics and industrial applications. So, it is a supplier to the AI boom and a huge part of the supply chain.
Arrow also serves as an enterprise consultant, helping equipment manufacturers develop hardware and software strategies and AI solutions.
It is this shift from being just a middleman, distributing supplies, to being a partner to its customers, providing components and expertise to build their AI systems , that has sent Arrow stock into overdrive. AI computing systems are complex and hard to build, so Arrow's Enterprise Computing Solutions (ECS) arm has filled a critical void, driving surging revenue.
In the latest quarter, revenue rose 39% year over year to $9.5 billion, while earnings jumped 201% to $4.55 per share, with adjusted earnings at $5.22 per share, up 190%. The components business accounted for $6.6 billion, while the growing ECS consultancy generated $2.8 billion in revenue.
The outlook for Q2 calls for overall revenue of between $9.15 billion and $9.75 billion. Adjusted earnings are anticipated to be $4.32 to $4.52 per share, down from Q1, but up 81% year over year. Management said it's a normalization of earnings after a hyperscaler client accelerated a build-out in Q1.
