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Our Amphenol Pick Is up 78%. Stick With It.

Sep 29, 2025 13:07:00 -0400 by Jacob Sonenshine | #Manufacturing #Follow-Up

Sales are growing. Analysts have consistently lifted earnings estimates.

Amphenol stock has soared since Barron’s recommended it earlier this year. (Michael Nagle/Bloomberg)

Key Points

Amphenol’s growth story hasn’t missed a beat. The stock has soared by 78% since its brief stumble in late January, when we published our recommendation to buy. The best move now: just hang onto it.

Shares of the $148 billion maker of connectors dropped in January with the rest of the technology sector, when China unveiled DeepSeek, whose super cheap artificial intelligence model implied lower sales for chipmakers and anybody in the data center supply chain. Those fears have since subsided and it’s been business as usual for U.S. tech companies ever since. Stocks in the sector have surged higher this year, with the Nasdaq now up 18% this year.

Amphenol for its part has continued its history of surpassing earnings expectations — by 20% in the first half of this year. That has forced analysts to dramatically lift earnings estimates, helping the stock.

That begs the question of what to do with the stock now, after such impressive gains. While it could easily stumble in the near term as some take some profits by selling, the long term looks promising.

Sales growth for the coming three years is estimated to come in at 13% annually, to reach $31 billion by 2028, according to FactSet’s analyst forecasts. Sales to electric vehicles are growing because, Tesla’s troubles aside, that business continues to grow, with each new EV requiring increased levels of connectivity. Amphenol’s datacom business, which is home to data center customers and more than doubled year over year in the second quarter, is the company’s fastest-growing segment. The others, smartphones and industrial, are more susceptible to the ebbs and flows of business and consumer demand.

Growth overall can continue along the same stable trajectory of recent years, partly due to Amphenol’s acquisitions strategy. It has added many smaller companies over the years in what is a fragmented industry. Amphenol is one of the largest players in what management estimates is a $250 billion business. Amphenol can leverage its position by rolling up these producers and adding revenue.

A recently-announced deal speaks to this. In August, Amphenol announced a $10.5 billion acquisition of CommScope’s connectivity and cable solutions business. With just over $3 billion of balance sheet cash, management will borrow a few billion dollars to finance the acquisition. That’s a drop in the bucket, given Amphenol’s more than $3 billion–and growing–annual free cash flow. Morningstar analyst William Kerwin says to “expect a swift deleveraging [debt pay down] thereafter with heady cash flow.”

Amphenol expects the new CommScope assets to produce $3.6 billion in sales next year, with two quarters flowing to Amphenol’s income statement because the deal should close in the second half of the year. That means analysts’ current consensus 2026 sales expectation of $24 billion, which is almost unchanged from before the deal announcement, should soon increase.

More importantly, the acquisition strengthens Amphenol. It currently sells connectors that go inside data center racks. With CommScope’s assets, it will sell fiber optic cables and other components that go around the racks as well. Sales for these products have nearly doubled in the past two quarters. The deal provides access to brand new customers and for existing clients, “we see opportunity for Amphenol to cross-sell its existing portfolio,” writes Cowen analyst Joe Giordano.

This picture can spark high earnings growth. Costs such as employee pay, marketing, and depreciation won’t rise as fast as sales, allowing profit margins to increase a bit over coming few years. Meanwhile, management can use some of its free cash flow to repurchase stock, which boosts earnings per share a bit more. Analysts expect EPS to grow 18% annually over the coming three years.

All of this makes the stock look ready for more gains. It trades at 37 times expected earnings for the coming 12 months. While that’s above the S&P 500’s 22.9 multiple, Amphenol deserves the premium, given its outsized growth. The 37x multiple is about 2.1 times expected EPS growth, but the stock has often traded at close to three times growth over the past five years. As long as that multiple stay close to in-place, higher earnings will bring the shares upward over time.

Don’t sell out of this one. The company can engineer plenty more gains in coming quarters.