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Avnet (AVT) Stock's Rally Likely to Continue Further: Here's Why

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Avnet, Inc. (AVT - Free Report) is currently one of the top performing stocks in the technology sector. The stock’s rally reflects the company’s robust fundamentals. Therefore, if you haven’t taken advantage of the share-price appreciation yet, it’s time you add the stock to your portfolio now.

The company has performed brilliantly over the past year and has the potential to carry on the momentum further.

What Makes Avnet an Attractive Pick?

Share-Price Appreciation: Avnet’s price trend reflects that the stock has had an impressive run on the bourse over the past year. Shares of the company have surged 47.1% compared with the Zacks Computer and Technology sector’s rally of 46.5%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Solid Rank & Growth Score: Avnet currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: One of the three analysts covering the stock has raised the earnings estimates for fiscal 2021 and fiscal 2022 over the past 30 days. During the same period, the Zacks Consensus Estimate for fiscal 2021 and 2022 has been revised upward by a penny and 7 cents, respectively.

Positive Earnings Surprise History: Avnet has an impressive earnings surprise history. The company outpaced estimates in all of the trailing four quarters, delivering an average earnings surprise of 389.6%.

Solid Growth Prospects: The Zacks Consensus Estimate of $2.34 for fiscal 2021 earnings suggests growth of approximately 52% from the year-ago reported figure. Moreover, earnings are expected to register 43% growth in fiscal 2022 and reach $3.35 per share. The long-term earnings per share growth rate is pegged at 22.7%.

Growth Drivers: Avnet is benefiting from robust demand for its products in the communication and defense market. The latest forecast for worldwide IT spending by Gartner is a positive for Avnet. The worldwide IT spending is anticipated to be $4.1 trillion in 2021, suggesting an increase of 8.4% from 2020. The research firm forecasts worldwide spending on IT services to grow 9% year over year to $1.11 trillion this year.

Its continued focus on boosting Internet Of Things (IoT) capabilities are helping it expand in newer markets and gain customers. On the IoT front, the company has made several partnerships with the likes of AT&T (T - Free Report) , as well as acquisitions, such as Dragon Innovation, Premier Farnell and, to enhance its capabilities in this space. Per the company, the aforementioned acquisitions have expanded its reach to more than two million customers as well as an active community of more than 750,000 entrepreneurs, makers and engineers.

Furthermore, Avnet has been taking major restructuring steps to streamline its business for the past few years. It intends to focus on high growth businesses only, and divest low profit or loss making businesses. In doing so, the company sold its troubled Technology Solution business to Tech Data Corporation for $2.6 billion during fiscal 2017.

The divestment of the Technology Solution division has enabled Avnet to focus on high growth areas, such as marketing electronic components and related products in the supply chain. The company intends to use its resources to make investments in embedded solutions, IoT and critical digital platforms as well as expand its footprint in newer markets.

Additionally, cost-saving efforts are aiding profitability. Moreover, Avnet’s expanding partner base is likely to boost top-line growth. Notably, it expects to replace the Texas Instruments (TXN - Free Report) revenues with higher-margin revenues by the end of fiscal 2022.

Considering Avnet’s growth prospects, it makes sense to invest for long-term gains.

Another Tech Stock to Consider

Another top-ranked stock to consider in the broader technology sector is Arrow Electronics (ARW - Free Report) which carries a Zacks Rank #2, at present.

The long-term earnings per share growth rate for Arrow is pegged at 20.1%.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>