And these new contracts are just the tip of the iceberg, says David Foropoulos, an analyst with SG Cowen in Boston. All of the major OEMs are evaluating additional outsourcing opportunities. Unless we take a huge spending reprieve, which I don't think is going to happen, these companies are going to come back strong, and Flextronics is in the cat bird seat. He estimates that over the next three to five years, OEMs will boost their outsourcing from 15 percent of their total cost of goods to over 50 percent, most of that going into the electronic manufacturing sector. Still, none of the analysts expects Wednesday's run-up to be the beginning of a major swing for the stock.
Investors are still skittish, and the earnings outlook for most of the industry is still cloudy.
I expect volatility to remain high, both up and down, and investors are going to have good opportunities to own Flextronics. Even at Wednesday's high, though, the company was trading at less than 20 times projected 2002 earnings, says Don Easley, an EMS analyst with T. Rowe Price in Baltimore. He does not have a target price set, but agrees that a fair valuation of the stock is closer to its growth rate, which he pegs at between 30 percent and 35 percent. Flextronics is on the front of that wave. Advertising Info Site Map Help Market data delayed up to 20 minutes.