Fabrinet Plummets 10.6% on Earnings Optimism and Supply Chain Woes – What’s Next for the Optical Manufacturing Giant?

Summary
• Fabrinet (FN) trades at $292.485, down 10.59% from its previous close of $327.12
• Intraday range spans $282.00 to $297.06 amid $1.54M turnover
• Q4 revenue hits $910M (up 21% YoY) but Q1 guidance hints at margin pressures

Fabrinet’s sharp intraday decline has ignited a frenzy of options activity and sector speculation. The stock’s 10.6% drop—its largest single-day move in months—comes despite record revenue and a new partnership with Amazon Web Services. With supply chain bottlenecks threatening Datacom revenue and gross margins under pressure, traders are scrambling to decode whether this selloff is a buying opportunity or a warning shot.

Supply Chain Constraints and Margin Pressures Overshadow Record Revenue Beat
Fabrinet’s 10.6% intraday plunge stems from a collision of bullish fundamentals and bearish near-term risks. While Q4 revenue of $910 million and $2.65 non-GAAP EPS smashed expectations, the company’s Q1 guidance revealed a darker picture. Supply chain bottlenecks for 1.6T components are expected to slash Datacom revenue sequentially, while new product ramps will temporarily depress gross margins. The $22 billion share repurchase program in Q4—a record for the firm—also drew scrutiny, with analysts questioning its sustainability amid $5 million in free cash flow. These headwinds, combined with a $329 price target from Barclays (just above current levels), have triggered profit-taking and short-term bearish positioning.

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Options and ETF Playbook: Navigating Volatility in a Bearish Setup
• 200-day MA: $239.92 (far below) | RSI: 52.94 (neutral) | MACD: 10.61 (bearish divergence)
• Bollinger Bands: $298.32 (lower) to $349.98 (upper) | 30D support/resistance: $329.39–$330.66

With the stock trading near its 52-week low and technical indicators pointing to short-term bearish momentum, aggressive traders should focus on near-term options with high leverage and liquidity. Two contracts stand out:

• FN20250919C280 (Call, $280 strike, 2025-09-19):
- IV: 39.28% (moderate) | Leverage: 13.92% | Delta: 0.6777 (high sensitivity)
- Theta: -0.4307 (rapid time decay) | Gamma: 0.01055 (strong price sensitivity)
- Turnover: $67,851 (liquid)
- Payoff at 5% downside: $13.52/share (max profit if price stays above $280)
- This call offers asymmetric upside if the stock stabilizes above $280, leveraging high gamma to capitalize on volatility.

• FN20250919C290 (Call, $290 strike, 2025-09-19):
- IV: 44.68% (elevated) | Leverage: 17.10% | Delta: 0.5617 (balanced)
- Theta: -0.4377 (aggressive decay) | Gamma: 0.0102 (responsive to price swings)
- Turnover: $1.21M (high liquidity)
- Payoff at 5% downside: $3.52/share (break-even if price rebounds to $290)
- Ideal for traders expecting a bounce above $290, with high leverage to amplify gains if the stock rebounds.

If $327.12 breaks decisively, consider FN20250919C280 for a short-term play. For a longer-term bet on stabilization, FN20250919C290 offers a balanced risk-reward profile.

Backtest Fabrinet Stock Performance
The backtest of FN's performance after an intraday plunge of -11% shows favorable results. The 3-Day win rate is 54.16%, the 10-Day win rate is 58.94%, and the 30-Day win rate is 66.73%. Additionally, the maximum return during the backtest period was 11.43%, which occurred on day 59, indicating that FN has a tendency to recover from such significant dips and even exceed pre-plunge levels.

Act Now: Short-Term Volatility Presents Strategic Entry Points
Fabrinet’s 10.6% drop has created a critical inflection point. While supply chain bottlenecks and margin pressures justify near-term caution, the stock’s long-term bullish setup—evidenced by a 31.9x dynamic P/E and $329 price target—suggests oversold conditions. Traders should monitor the $298.32 Bollinger Band support and $329.39 30D resistance level. With Cisco (CSCO) up 0.15%, sector strength could provide a tailwind if Fabrinet’s fundamentals hold. For now, the FN20250919C290 call offers a high-leverage play on a potential rebound, while a breakdown below $282.00 would validate a deeper bearish thesis. Watch for $327.12 to retest as a key pivot.