What Avnet Holders Got Right

If Avnet was on your watchlist instead of in your account, the last 12 months may feel like a missed shot. For Avnet shareholders, the return over the past year was 71.2%, including dividends. That outcome naturally raises a tougher question. Back on 6 November 2025, what could have helped you see more than a cyclical bounce and focus instead on the specific claim that IoT, AI and electrification would reshape where this distributor earns its future margins?

Avnet is not the only name tied to this theme. Zero in on 52 AI infrastructure stocks and compare how each one is priced.

The Two Avnet Stories Investors Had To Weigh

The shares cost US$47.17 at the start of the period, and Avnet sat between two very different stories about what came next.

The bullish view argued that IoT, AI and electrification would open higher quality business for Avnet, with a Fair Value of US$64, a price implied by assumptions that Farnell could return to double digit operating margins within 4 to 8 quarters.

The bearish camp saw direct supply chains and digital rivals eroding that upside, with a Fair Value of US$43 and a key worry that large manufacturers might increasingly bypass distributors and squeeze long term margins.

What The Results Told Investors About Avnet’s Story

Record quarters tied to AI and data center demand, plus Farnell reaching its strongest operating margin in three years, leaned toward the optimistic Avnet case that higher quality electronics work could lift profitability. Measured results backed that up, with revenue at US$10.72b and net income at US$282.17m in Q1 2027, and net margin at 2.6%.

The useful takeaway is how much the thesis hinged on margins, not headlines. For any distributor, track segment operating margins and net margin side by side with IoT or AI claims before deciding how much of the story to believe.

What Today's Avnet Price Already Assumes

Avnet now trades at US$79.28, with this Narrative’s Fair Value sitting above the current price based on its own assumptions rather than settled fact.

The Narrative leans on AI and data center demand, tighter supply and Farnell efficiency. The key question is whether Avnet can keep expanding operating margins and return on working capital from here.

"Improving operating leverage and capital efficiency are now more visible, with adjusted operating income reported to be growing about 2.6x faster than sales, SG&A as a percentage of gross profit trending toward a sub 60% target and return on working capital reaching 19%, which together create room for further operating margin expansion and support for adjusted EPS growth."

One Narrative has put a figure on that disagreement. → See the Narrative with its higher Fair Value, assumptions and all

Find Your Own Contrarian Opportunity

By the time a rally makes headlines, you are reading about returns someone else has already earned. Why not go straight to the source and look for your own contrarian opportunity? These three companies trade below our estimated value.

• Company 1 - 27% below our estimate - targets complex manufacturing programs in regulated industries with an expanding sales pipeline.
• Company 2 - 31% below our estimate - expands capacity for AI-focused data center optics and advanced photonics manufacturing programs.
• Company 3 - 33% below our estimate - scales coconut-based beverages across branded and private label channels while controlling sourcing costs.

Those are three of them. See every one of the 39 undervalued companies on it →

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