Our $85 target price is based on 30x PE applied to FY26E EPS. This represents a premium to its median 5-year PE multiple of 29x and higher than the peer group,  which we believe reflects their growth characteristics, cyclical recovery in the broader tech supply chain and the company’s AI upside potential.

Our peer group is comprised of connectors and semis companies. The peer group trades at a median PE NTM multiple of ~25x, with a range varying from 35x to 9x. Amphenol shares have always traded higher than the peer group on higher margin structure, defensible business model able to withstand a tough macro, strong execution as well as continued potential for acquisitions to impact growth. We also note that historically APH has traded at 1.25x PE relative to the SOX, though in upcycles this premium has expanded to 1.6x to 1.7x.

Risks to the stock achieving our target price include: 1) a general economic slowdown (globally or in key markets) more severe than current expectations; 2) a slowdown in tech spending beyond current expectations; 3) an increase in raw material prices that could pressure the company's ability to meet and exceed earnings estimates; 4) the company has actively made acquisitions; given the highly-fragmented connector industry and synergies from larger-scale operations, we expect this trend will likely continue and believe our estimates and positive outlook would be at risk if it does not; 5) an increase in raw material prices that could pressure the company's ability to meet and exceed earnings estimates; and 6) exchange rate fluctuations, given the firm's global footprint, which could negatively impact sales, operating margins, and equity. 

If the impact on the company from any of these factors proves to be greater than we anticipate, the stock will likely have difficulty achieving our target price.