Strong semiconductor/component demand, coupled with shortages and higher prices, led to electronic parts distributors over-earning relative to prior cycles, analyst Joe Quatrochi wrote in a note to clients.
He warned that near-term results likely peaked and are set up for a cycle correction.
"A broadening of weakening demand data points and some deterioration of average component pricing (from record levels) will put additional downward pressure on distributor earnings beyond consensus estimates," said Quatrochi.
The analyst also noted downward pressure from deflationary component pricing headwinds and mix effect related to European recession fears.
Wells Fargo cut its price targets on ARW to $87 from $125 and AVT to $35 from $45. Both new PTs imply potential downside of ~13% to the stocks' last close.
Shares of ARW declined ~29% YTD while AVT stock fell 6.6%.