Truist cuts TE Connectivity stock price target on datacenter concerns By Investing.com

Truist cut TE Connectivity’s price target to $240 from $244 while keeping a Hold rating, citing flat datacenter and AI revenue quarter-over-quarter, a reduced view of the scale-out networking opportunity, and a recent run-up in the shares. The firm raised its 2027 EPS estimate to $12.95 from $12.51, but said the selloff after roughly in-line Q1 results and a modestly above-consensus Q2 outlook was an over-reaction. Separately, TE Connectivity’s Q2 FY2026 results beat expectations with EPS of $2.73 versus $2.68 expected and revenue of $4.74 billion versus $4.73 billion expected.

Analysis

TEL looks like a classic post-print digestion setup where the market has already priced in a narrative of slowing AI/networking monetization, but the better signal is that management is still printing enough to support upward estimate drift. The key second-order issue is that datacenter revenue stalling for two quarters in a row can compress the multiple even if earnings continue to grind higher, because investors are paying for duration on AI exposure, not just near-term EPS. That makes this less about a single quarter and more about whether the mix can re-accelerate by the next two reporting cycles.

The selloff likely over-penalizes TE’s networking optionality relative to its broader industrial cash-generation base. If scale-out optical remains muted, capital may rotate toward adjacent beneficiaries with cleaner AI linkage, but the flip side is that TEL’s diversified end markets should dampen downside versus pure-play AI infrastructure names. In other words, the market may be treating a lag in one segment as a structural impairment to the whole franchise, which is usually the wrong framework unless order momentum rolls over for multiple quarters.

For competitors and suppliers, a softer TEL multiple can reset expectations across the passive/active interconnect and sensor chain, especially those leaning on datacenter exposure for narrative premium. The contrarian takeaway is that the stock may not need a bullish thesis to outperform from here; it only needs the market to stop extrapolating zero growth in AI attach rates. That makes the next catalyst less about beating consensus EPS and more about whether management can show sequential improvement in bookings and backlog conversion heading into the next print.

Key Decisions for Investors

• Buy TEL on weakness over the next 1-3 weeks, using the post-earnings drawdown as entry; target a 10-15% rebound if orders improve and the market re-rates the multiple back toward peers.
• Structure a call spread in TEL out 2-3 months to express recovery in AI/networking sentiment with defined downside; the setup favors upside convexity if the selloff was purely multiple compression.
• Pair trade: long TEL / short a higher-beta datacenter interconnect beneficiary with richer AI expectations for the next 1-2 quarters; thesis is mean reversion in narrative premium versus execution quality.
• If already long TEL, hedge with near-dated puts into the next industry datapoint cycle; risk is that a second sequentially flat datacenter reading turns the current miss into a multi-quarter derating.
• Watch for confirmation in bookings and backlog conversion within the next earnings cycle; if those fail to inflect, reduce exposure because the stock likely transitions from overreaction to value trap.