Analyst Note| William Kerwin |
We maintain our $129 fair value estimate for narrow-moat Arrow Electronics after the company reported strong first-quarter results. Our long-term view is unchanged, and we view the shares as fairly valued. Arrow is benefiting from high-flying electronics demand across end markets and geographies, while limited supply is allowing it to pass on supplier pricing increases and boost profitability, but we view both dynamics as finite. While the near term is stronger than we forecast, we maintain our expectations for Arrow’s performance over the course of a cycle, which we think can lead to swings in growth and profits. Though we maintain our view of Arrow as the best operator in its peer group, we still expect it to be vulnerable to cyclical dynamics, and our expectations for its results through a full cycle are unchanged.