Flex Stock Surges 55% in the Past Year: Will the Uptrend Continue?

Core Insights - Flex Ltd. is experiencing strong performance in its cloud and power portfolios, benefiting from increased data center exposure, global manufacturing scale, and robust cash flow [1][10] Financial Performance - The stock has increased by 54.7% over the past year, outperforming the Zacks Electronics - Miscellaneous Products industry, the Zacks Computer and Technology sector, and the S&P 500, which grew by 31.5%, 30.7%, and 23.4% respectively [2] - Flex has raised its fiscal 2026 revenue guidance to $26.7–$27.3 billion, an increase of $500 million from the previous midpoint, with an expected adjusted operating margin of 6.2% to 6.3% [12] - The company projects adjusted EPS of $3.09 to $3.17, raising the midpoint by 17 cents per share [12] - Flex anticipates generating approximately $6.5 billion in revenue from data centers, reflecting a year-over-year growth of at least 35% and accounting for 25% of total revenues [6][10] Business Strategy - Flex is transitioning into an end-to-end solutions provider, offering design, procurement, manufacturing, and supply services across various products, including electronics and athletic shoes [4] - The company is aggressively entering the high-growth data center market, with partnerships with LG Electronics and NVIDIA to develop integrated modular cooling systems and high-performance AI data centers [5][10] - Flex's global scale supports regionalization strategies, enhancing agility and reducing risks while meeting evolving trade requirements [7] Market Position - The company has embedded AI-enabled systems and advanced automation across its facilities, which are crucial for the data center segment and other key markets like automotive, healthcare, and industrials, contributing around 75% of total revenues [7] - Flex's regional revenue mix demonstrates its adaptability to shifting customer demands, maintaining a bullish outlook on its advanced manufacturing capabilities [8][11] Challenges - Flex faces challenges such as a highly leveraged balance sheet, macroeconomic uncertainty, and shifting trade policies that may impact performance [14] - Weak demand trends in the automotive business and potential tariff pressures on raw material sourcing could affect margins and cash flows [14] - The company operates in a competitive EMS landscape, where increasing competition may limit contract wins and revenue growth [14] Investment Considerations - The stock trades at a forward 12-month P/E ratio of 20.08, below the industry's average of 27.1, indicating potential undervaluation [15] - With a Zacks Rank 3 (Hold), the company shows strength in its cloud and power portfolios, but existing investors may consider holding while new investors might wait for a more attractive entry point [16]