Why Flex Ltd. (FLEX) Could Be a Top Play in the Electronic Components Sector

Flex Ltd. (FLEX), a global leader in electronics manufacturing and engineering services, has quietly been positioning itself for long-term growth amid a challenging macroeconomic backdrop. With strategic acquisitions, margin improvements, and strong momentum in high-margin segments like data center infrastructure, the stock could be an attractive buy for investors willing to look past near-term headwinds. Let’s dive into the data.

Financial Resilience Amid Sector Challenges

Flex’s first-quarter fiscal 2025 results revealed a company navigating headwinds with discipline. Net sales of $6.3 billion and adjusted EPS of $0.51 highlighted operational stability, while margin expansion (adjusted operating income up 23% year-on-year) underscored cost management. Second-quarter results further reinforced this trend, with adjusted EPS rising to $0.64—12% higher than the prior year—despite a slight dip in net sales to $6.5 billion.

The company’s full-year guidance remains robust, projecting revenue of $24.9–25.5 billion and adjusted EPS of $2.39–2.51. Notably, Flex’s free cash flow hit $757 million year-to-date, a key indicator of financial health.

Strategic Moves to Drive Growth

Flex isn’t just surviving—it’s investing in sectors with long-term potential:
- Data Center & Power Solutions: The $45% year-on-year growth in data center infrastructure (Q3 fiscal 2024) reflects demand for high-performance computing and 5G infrastructure. The new Dallas facility and acquisition of JetCool Technologies (a leader in thermal management for data centers) are strategic bets on this trend.
- Medical Devices: Flex’s expertise in precision manufacturing positions it to capitalize on rising demand for wearable health tech and diagnostic equipment.
- Acquisition of Crown Technical Systems: This move expands Flex’s footprint in high-value markets, offering synergies in power solutions and industrial automation.

Analysts Split, but Bulls See Value

Zacks Investment Research assigns a “Hold” rating due to valuation concerns—the stock’s forward P/E of 12.18 exceeds the industry average of 7.43. However, this premium is partially justified by Flex’s exposure to high-growth markets. Competitors like BlackBerry and InterDigital are rated higher, but Flex’s diversified revenue streams (medical, industrial, and consumer electronics) offer a more balanced risk profile.

Risks on the Horizon

• Geopolitical Tensions: With 19% of revenue from China and 26% from Mexico, supply chain disruptions or trade policy shifts could impact margins.
• Customer Concentration: The top 10 clients account for 37% of sales, creating dependency risks.
• Valuation Concerns: The stock’s recent 27.6% decline (over three months) suggests investors are pricing in these risks.

Conclusion: A Buy at Current Levels

Despite headwinds, Flex’s fundamentals argue for a long-term bullish stance. The company is growing its adjusted EPS at a 15% clip (from $0.51 to $0.64 over two quarters) while maintaining robust cash flow. Strategic bets in data center and medical tech—sectors with 7-10% annual growth potential—position Flex to outperform as macroeconomic conditions stabilize.

While the near-term risks are real, Flex’s valuation multiple could compress further, creating a buying opportunity. With shares up 3.5% pre-market on April 2025 news and an upcoming earnings report (May 7, 2025), now may be the time to consider FLEX as a core holding in a tech portfolio. For investors focused on resilience and innovation, Flex Ltd. checks the boxes.