Flextronics International Ltd. (NASDAQ: FLEX), On Thursday, received an upgrade from a Craig-Hallum analyst, who changed the stock's rating from Hold to Buy and increased the price target to $39.00, up from the previous $27.00.
The upgrade comes after the successful spin-off of Flextronics' Nextracker asset. The company is recognized for its effective execution as a contract manufacturer with a focus on securing long-term design wins that are expected to enhance margins.
The analyst noted Flextronics' consistent efforts to be shareholder-friendly, highlighting the company's history of significant share repurchases. Over the past five years, Flextronics has reduced its share count by more than 20%, from over 500 million to 411 million shares in the current quarter. This reduction in shares outstanding is part of the company's strategy to deliver value to its shareholders.
Flextronics is also likely to capitalize on opportunities in AI-related datacenter sectors. The company is expected to grow its data center business at a compound annual growth rate (CAGR) of approximately 20% from fiscal year 2024 through 2029. The projected growth would increase the data center business's revenue from around $3 billion in FY24 to an estimated $5.5 billion by FY27 and further to approximately $8 billion by FY29.
The analyst believes that the market is beginning to recognize Flextronics' potential, which has led to an expansion of the price-to-earnings (P/E) multiple from the company's historical forward P/E average of around 9.5x. The new price target of $39 is based on a 13x multiple of the company's projected FY27 earnings per share (EPS) of $3.00. This represents a significant increase in valuation, reflecting the analyst's confidence in the company's growth trajectory and financial performance.
Meanwhile, Flex (NASDAQ:FLEX) reported steady Q1 earnings for fiscal year 2025, with net sales of $6.3 billion and a GAAP operating income of $233 million. The company's adjusted operating income stood at $306 million, with a GAAP net income of $139 million and adjusted net income of $211 million. The company also announced that CFO Paul Lundstrom will step down, with Jaime Martinez stepping in as the interim CFO.
It also recently acquired FreeFlow, a specialist in asset disposition and digital circular economy tracking, and Ojjo, a renewable energy company.
InvestingPro Insights
Flextronics International Ltd. (NASDAQ:FLEX), following its upgrade by a Craig-Hallum analyst, shows promising figures that align with the positive sentiment. According to InvestingPro data, the company's market capitalization stands at a robust $12.67 billion, indicating a solid presence in the market. With a forward-looking P/E ratio (last twelve months as of Q1 2025) of 17.41, Flextronics trades at a valuation that is attractive relative to near-term earnings growth, as noted by one of the InvestingPro Tips. Moreover, the company has demonstrated a strong price performance, with a significant 36.72% price total return over the last six months, and an even more impressive 53.63% return over the past year.
InvestingPro Tips further highlight Flextronics' aggressive share buyback strategy and high shareholder yield, which align with the article's mention of the company's shareholder-friendly initiatives. Additionally, with three analysts revising their earnings upwards for the upcoming period and projections of strong free cash flow yield, the company's financial outlook seems favorable. It's also worth mentioning that Flextronics is trading close to its 52-week high, at 93.08% of the peak price.
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