Plexus Gains 15% in 6 Months: Will the Stock Climb Higher in 2026?

Core Insights - Plexus Corporation's share performance has been underwhelming, with a 14.5% gain over the past six months, significantly lagging behind the Electronic Manufacturing Industry's 47.5% growth and the S&P 500's 16.2% return [1][7] Price Performance - Other competitors in the electronics manufacturing services sector, such as Jabil, Sanmina, and Flex, have shown gains of 9.5%, 61.9%, and 30.1%, respectively, raising questions about Plexus's potential for a rebound in 2026 [3] Tailwinds for Plexus - Plexus is expected to benefit from new program ramps, focusing on high-demand sectors like healthcare, aerospace, and industrial markets, with 28 manufacturing program wins projected to contribute $274 million to annualized revenues [4][5] - The company has a strong pipeline with a funnel of qualified manufacturing opportunities valued at $3.7 billion, supporting its revenue growth target of 9-12% for fiscal 2026 [5] - In fiscal 2025, Plexus generated $154 million in free cash flow, allowing for debt reduction and share repurchases, with expectations to generate $100 million in free cash flow for fiscal 2026 [10][11] Sector Performance - The aerospace sector, particularly defense and space, experienced double-digit growth, while healthcare and life sciences revenues increased by 5% for the fiscal year, with expectations for further acceleration [8][9] Headwinds for Plexus - Revenue growth for fiscal 2026 is contingent on modest improvements in end-market demand, with challenges in the industrial sector due to weaknesses in industrial equipment and vehicle electrification [12] - Plexus relies heavily on a few large customers, with the top 10 customers accounting for 49% of revenues, exposing the company to customer concentration risks [13] - Macro uncertainties from shifting trade policies and competition from other electronics manufacturers pose additional challenges [14] Valuation - Plexus is trading at a forward 12-month price/sales ratio of 0.93, slightly above the sector's average of 0.89, while competitors like Flex, Jabil, and Sanmina have lower multiples [17][18] Investment Outlook - While Plexus has a healthy long-term outlook, near-term expectations are uncertain, suggesting that new investors should wait for a better entry point, while existing investors may consider holding the stock [19]