Flex Ltd. FLEX stock has plunged 27.6% in the past three months, steeper than the 20.9% fall of the Zacks Electronics - Miscellaneous Products industry. Over the same time frame, the Zacks Computer and Technology sector and the S&P 500 composite have registered declines of 18% and 12.4%, respectively. Escalating trade tensions and tariff troubles have been a drag on the overall market performance.

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Does this pullback indicate a buying opportunity amid increasing macro uncertainty? Let us evaluate the pros and cons of FLEX and decide the best course of action for your portfolio.

Flex Expands Footprint With Strategic Moves

Flex is experiencing strong momentum across its data center, medical devices and consumer-related markets. The company's strategic programs in cloud, power and automotive businesses have contributed to its robust top-line growth in the fiscal third quarter. The initiatives are likely to positively impact Flex’s performance in the fiscal fourth quarter. Artificial intelligence (AI)-driven cloud transformation led to 45% year-over-year growth in the data center business in the fiscal third quarter. It continues to anticipate a long-term multi-year data center CAGR of 20%.

Flex Ltd. Price and Consensus

Flex Ltd. price-consensus-chart | Flex Ltd. Quote

Recently, the company announced the launch of a New Product Introduction (NPI) center near Boston, dedicated to serving healthcare customers. This state-of-the-art facility is designed to support the entire product development journey from prototype to preclinical builds, design verification and production transfer, enabling faster, more scalable and lower-risk market entry for medical products.

On Feb. 20, 2025, Flex announced a significant expansion of its U.S. manufacturing capacity with the launch of a new 400,000-square-foot facility in Dallas dedicated to power product manufacturing. This new facility strengthens Flex’s efficiency and production capabilities, particularly for its grid-to-chip data-center power infrastructure solutions, including power distribution units, power pods and low-voltage switchgear.

Robust Acquisitions Drive Flex’s Expansion

Flex has consistently used acquisitions to expand its manufacturing footprint and enter new markets. Key acquisitions, including Bose facilities, Mirror Controls International (MCi), Alcatel-Lucent and Nextracker, have strengthened its presence in audio, automotive, telecom and smart solar tracking. Smaller acquisitions have also bolstered its capabilities in medical devices, consumer electronics, household industrial and lifestyle markets.

Recent strategic moves include the May 2024 acquisition of FreeFlow, enhancing Flex’s presence in secondary markets and sustainability solutions. In November 2024, Flex acquired JetCool Technologies, further enhancing its data center and power solutions to help hyperscale and enterprise customers address growing challenges related to power, heat and scalability in the AI era. Also, Flex finalized its $325 million acquisition of Crown Technical Systems, expanding its power portfolio and increasing its presence in the U.S. data center and utility power markets.

Flex’s Positive Outlook Signals Strong Growth Ahead

Flex reported strong fiscal third-quarter results and issued an optimistic outlook for fiscal 2025. Flex now expects revenues of $25.4-$25.8 billion (up from $24.9-$25.5 billion) and adjusted EPS of $2.57-$2.65 (previously $2.39-$2.51). With $757 million in free cash flow generated so far, the company is on track to surpass its $800 million full-year target.

Headwinds for Flex

Flex is navigating near-term challenges, with fiscal fourth-quarter sales for its Reliability Solutions expected to remain flat to down in mid-single digits, primarily due to continued softness in the automotive segment. While data center power remains a bright spot, broader industrial sector weakness—especially in the renewable energy space—is exerting pressure. Additionally, muted enterprise IT and telecom spending (excluding cloud) and cautious consumer behavior are contributing to near-term headwinds.

Also, Flex remains exposed to concentration risks related to geography and key accounts despite having a diversified customer base across various end markets. A significant portion of its fiscal 2024 revenues was derived from China and Mexico, accounting for 19% and 26% of net sales, respectively. Additionally, the company’s top 10 customers contributed approximately 37% of total sales during the year.

Flex Trades at a Premium

In terms of the forward 12-month Price/Earnings ratio, FLEX is trading at 12.18, higher than the industry’s multiple of 7.43.

How Should Investors Play FLEX Stock?

Flex is gaining from strong momentum across its data center, medical devices and consumer-related markets. Strategic acquisitions also bode well. However, softness in the automotive segment and growing customer concentration risk continue to pose challenges.

Therefore, we believe new investors should wait for a better entry point, and existing investors should retain Flex stock, which currently carries a Zacks Rank #3 (Hold).

Stocks to Consider in Computer Technology Space

Some better-ranked stocks from the broader technology space are BlackBerry Limited BB, InterDigital, Inc. IDCC and Hayward Holdings, Inc. HAYW. BB presently sports a Zacks Rank #1 (Strong Buy), whereas IDCC and HAYW carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackBerry’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 93.75%. In the last reported quarter, BB delivered an earnings surprise of 50%. Its shares have surged 25% in the past six months.

IDCC earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, with the average surprise being 158.41%. The company’s long-term earnings growth rate is 15%. Its shares have jumped 27.7% in the past six months.

Hayward Holdings’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while in line in one, with the average surprise being 6.88%. The company’s long-term earnings growth rate is 8.5%. Its shares have decreased 9.7% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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