Foxconn Stock Upgraded by Morgan Stanley

Shares in Apple supplier Foxconn (SS:601138) Technology Co Ltd (TW:2354) rose 2.6% on Wednesday after Morgan Stanley analysts upgraded the stock from Underweight to Overweight, raising the price target from NT$48 to NT$115.

Positive Outlook

The upgrade comes with a positive outlook for new game console shipments and potential growth in the AI server cooling solutions market. Foxconn is expected to launch a new game console in Q1 2025. Although shipment volumes are anticipated to be conservative in Q4 2024, Morgan Stanley's checks suggest a significant increase in overall revenue with the console release.

AI Server Cooling Solutions

Foxconn also stands to benefit from the Hon Hai group's focus on self-designed components for liquid cooling in AI servers. The company has been qualified to supply cooling fans for GB200 server racks starting in 2025 and is projected to begin shipping manifolds for future AI servers by late 2025. These contributions are not yet included in Morgan Stanley's earnings estimates for 2025-26.

Earnings Estimates Revised

Morgan Stanley has revised its earnings estimates for Foxconn, lowering them by 2% for 2024 while increasing them by 38% for 2025 and 43% for 2026, citing an optimistic outlook for game console shipments and operating leverage.

Conclusion

Analysts highlight Foxconn's multi-year growth story, pointing to a revival in game console shipments for 2025 and potential contributions from AI thermal solutions in 2026. Foxconn's stock has surged 60% year-to-date, outperforming the TAIEX's 29% gain. Upcoming third-quarter 2024 earnings results and guidance could act as catalysts for the stock.