TE Connectivity stock price target raised to $200 from $195 at Evercore ISI

TE Connectivity (TEL) reported robust June quarter results, surpassing street estimates with $4.53 billion in revenue and $2.27 EPS, driven by 13.9% sales growth and an all-time high 19.9% operating margin, notably in the Industrial segment. The company issued strong September quarter guidance and raised its FY25 AI revenue target to $800 million, projecting over $1 billion by FY26. Consequently, Evercore ISI raised its price target to $200, maintaining an Outperform rating, underscoring TEL's strong operational performance and positive outlook, despite the stock trading near its 52-week high and potentially above its fair value.

Analysis

TE Connectivity (TEL) delivered a robust financial performance, exceeding consensus estimates for its June quarter with revenue of $4.53 billion and EPS of $2.27, against expectations of $4.32 billion and $2.08. This outperformance was underpinned by significant year-over-year sales growth of 13.9% (9% organic), driven by strength in its Transportation and Industrial segments. Profitability reached a new peak, with the company achieving an all-time high operating margin of 19.9%, a sequential increase of 50 basis points, largely fueled by a 390 basis point year-over-year margin expansion in the Industrial segment. The positive momentum is expected to continue, as TE Connectivity issued September quarter guidance for revenue and EPS of $4.55 billion and $2.27, respectively, surpassing street forecasts. Further bolstering the long-term outlook, the company raised its fiscal 2025 AI-related revenue target to $800 million and projects exceeding $1 billion in 2026. This strong operational execution and positive guidance prompted Evercore ISI to increase its price target to $200. However, this bullish fundamental picture is juxtaposed with a valuation concern, as the stock is trading near its 52-week high after a 27.3% year-to-date run and is noted by InvestingPro as trading above its fair value.

Key Decisions for Investors

• Given the strong earnings beat, record margins, and upwardly revised guidance, particularly in the high-growth AI sector, investors with a long-term horizon may view the stock's momentum as fundamentally justified.
• Investors should exercise caution regarding valuation, as the stock is trading near its 52-week high and is flagged as potentially overvalued, which could limit near-term upside or increase volatility.
• Monitor the company's ability to sustain the high operating margins in its Industrial segment and execute on its aggressive AI revenue targets, as these factors are now critical to supporting the current stock price.