TE Connectivity’s 2023 Uncertainty Doesn’t Alter Our Long-Term Growth Thesis; Maintain $125 FVE

We are maintaining our $125 fair value estimate for narrow-moat TE Connectivity after the company closed out its fiscal-year 2022 with a strong fourth quarter that exceeded our expectations but provided a tempered outlook heading into the first quarter of fiscal 2023. Inflationary pressures, supply chain challenges, and foreign exchange headwinds persist. Though we expect these to impact TE’s results in the short term, we maintain our long-term thesis that TE is poised for growth rooted in increased vehicle electrification and content growth per vehicle. TE’s sticky position in applications like electric vehicles underpins our narrow economic moat rating, and we believe fleet electrification will continue mostly unabated even in a softer macroeconomic environment. We believe the disappointing first-quarter outlook and investor uncertainty sent shares down over 6% after results. We now view shares as slightly undervalued but advise seeking a greater margin of safety to invest.