Avnet Inc.AVT is witnessing strong momentum in its Interconnect, Passives and Electromechanical (IP&E) business, supported by rising demand for advanced electronic components across multiple end markets. During the fourth quarter of fiscal 2026, IP&E sales reached a record high, with full-year sales approaching $5 billion, highlighting the business' growing contribution to Avnet's performance.
The improving demand environment is being driven by investments in artificial intelligence (AI) infrastructure, industrial automation, robotics, drones and edge computing applications. These technologies require increasingly sophisticated electronic systems incorporating connectivity, power management, sensing and thermal management components.
As a result, customers increasingly seek integrated solutions combining semiconductors and IP&E products, creating opportunities for Avnet to leverage its technical expertise, supplier relationships and supply chain capabilities. Avnet's higher-margin IP&E business also benefits from the increasing complexity of customer requirements.
AVT can provide more comprehensive solutions than traditional component distribution alone. This integrated approach strengthens its value proposition while supporting customer product development across emerging technology applications. However, the operating environment presents certain challenges.
During the fourth quarter, lead times increased across most semiconductor and IP&E product categories, indicating a tightening supply environment. Avnet also expects further price increases from several semiconductor and IP&E suppliers in the coming months.
How Competitors Fare Against Avnet
Avnet operates in a competitive technology distribution market where it competes with global component distributors as well as broader IT distributors, including Arrow ElectronicsARW and TD SYNNEXSNX. However, Avnet benefits from the niche it has created for itself, which helps protect its margins.
Arrow Electronics competes head-to-head with Avnet in electronic component distribution, semiconductor supply, embedded computing and engineering services. Both Arrow Electronics and Avnet serve OEMs, industrial manufacturers, automotive suppliers, communications equipment vendors and data center customers.
Avnet comes to a crossroads with TD SYNNEX in the broader AI infrastructure value chain. Avnet plays its role much earlier in the technology value chain by supplying electronic components directly to equipment manufacturers, making the overlap minimal with TD SYNNEX. Given these dynamics, Avnet has little to worry about right now.
AVT's Price Performance, Valuation and Estimates
Avnet's shares have surged 91.1% in the year-to-date period, outperforming the Zacks Electronics - Parts Distribution industry's 62.4% growth.
AVT YTD Performance Chart
Image Source: Zacks Investment Research
Despite this outperformance, AVT stock is trading at a price-to-sales multiple of 0.22X, which is below the P/S multiple of industry's 0.34X. The undervaluation is further substantiated by the Zacks Value Score of B.
AVT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AVT's fiscal 2027 earnings is pegged at $10.45 per share, implying year-over-year growth of 84%. The estimate has been revised upward in the past 30 days.
Image Source: Zacks Investment Research
AVT currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
