On Monday, JPMorgan (NYSE:JPM) updated its outlook on Flextronics (NASDAQ:FLEX), raising the stock's price target to $40 from the previous $34, while maintaining an Overweight rating. The firm's analyst highlighted Flextronics' efforts to reassure investors about its ability to stay on course with its fiscal year 2025 (FY25) targets, despite ongoing end-market challenges.
Flextronics has been recognized for setting more achievable goals and closely meeting or approaching those expectations, particularly in comparison to its peer, Jabil. The management team at Flextronics is expected to address investor concerns regarding the impact of market weaknesses on the company's previously stated targets for FY25. Although Flextronics anticipates a modest year-over-year revenue decline for FY25, in contrast to Jabil's expectation for modest organic growth, the conservative guidance appears more realistic against the backdrop of a weaker macroeconomic environment.
The analyst anticipates that Flextronics will confirm its FY25 earnings per share (EPS) outlook, with revenues likely to hit the lower end of the previously provided range. The company is expected to deliver in-line EPS results and provide a guidance for the first quarter of FY25 (ending in June) and the second quarter of FY25 (ending in September). This guidance is predicted to reassure investors about Flextronics' capability to leverage margins to meet earnings targets, even with a slower revenue recovery throughout the year.
Looking ahead, positive catalysts for Flextronics may include a broader macroeconomic recovery and potential expectations of a recovery following interest rate cuts, which could heighten investor interest in the company. The firm believes that such a macroeconomic shift would provide additional ways for Flextronics to exceed EPS forecasts. The new December 2025 price target of $40 is based on a valuation re-rating due to a secular increase in margins and is derived by applying a 12 times price-to-earnings (P/E) ratio to the updated calendar year 2026 estimates.
In other recent news, Nextracker has acquired renewable energy company Ojjo in an all-cash deal valued at approximately $119 million. The acquisition is expected to enhance Nextracker's offerings in the utility-scale solar market and expand its addressable market. Meanwhile, Flex (NASDAQ:FLEX) has made a strategic move to acquire FreeFlow, an asset disposition and digital circular economy tracking specialist. This acquisition is aimed at enhancing Flex's product lifecycle services and promoting sustainability.
On the financial front, Flex reported resilient growth in its Q4 and fiscal year 2024 results, despite a decline in revenue. The company's Q4 revenue was $6.2 billion, marking a 12% year-over-year decrease, and the full-year revenue was $26.4 billion, a 7% drop. However, key profitability metrics such as gross profit, operating income, and earnings per share (EPS) showed an increase.
Looking ahead, Flex's outlook for fiscal 2025 includes a prediction of flat to 3% decline in revenue, with adjusted operating margins between 5.2% and 5.4%, and an adjusted EPS between $2.30 and $2.50. These recent developments highlight the companies' strategic moves and financial performance.
InvestingPro Insights
Following JPMorgan's updated outlook on Flextronics (NASDAQ:FLEX), it's pertinent to consider additional metrics and insights that could further inform investors. According to real-time data from InvestingPro, Flextronics is currently trading at a P/E ratio of 12.75, which is lower than the adjusted P/E ratio for the last twelve months as of Q4 2024, indicating a potentially undervalued stock relative to its near-term earnings growth. Additionally, the company's management has been actively buying back shares, a move that could signal confidence in the company's future performance and support for the stock price.
An InvestingPro Tip worth noting is that Flextronics has a high shareholder yield, which may appeal to investors looking for companies with a strong return on investment. Moreover, the company is considered a prominent player in the Electronic Equipment, Instruments & Components industry, which could be a key factor in its resilience and growth potential. For readers interested in further analysis and additional InvestingPro Tips, there are 6 more tips available on the InvestingPro platform for Flextronics, which can be accessed using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
InvestingPro Data also shows that Flextronics has experienced a large price uptick over the last six months, with a 25.33% total return. This performance is complemented by a robust 40.57% one-year price total return as of the latest data. While analysts have revised their earnings downwards for the upcoming period, the company is predicted to be profitable this year and has been profitable over the last twelve months. These insights may help investors gauge the company's financial health and future prospects in light of the current market conditions.
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