TE Connectivity Earnings: Auto Strength Offsetting Weakness Elsewhere as We Raise Our Fair Value Estimate to $135

We raise our fair value estimate for shares of narrow-moat TE Connectivity to $135, from $128, as we bake in expectations for a recovery in results beginning in fiscal 2024. Fiscal fourth-quarter results and fiscal first-quarter guidance were roughly in line with our model. TE is seeing pockets of weak demand in industrial equipment, heavy vehicles, and telecom customers, but we're encouraged by ongoing good results in automotive sales and growth for artificial intelligence, or AI, related sales. We think weak markets will last through the first half of 2024, but that TE can grow modestly in fiscal 2024 and see much more meaningful growth and margin expansion in fiscal 2025. We see shares as undervalued.