Raymond James Upgrades Flex Two Notches To Strong Buy

Raymond James on Friday issued a company note on Flextronics International Ltd. FLEX after strong FQ3 results have made the company's shares appear undervalued. Analysts at Raymond James upgraded Flextronics to Strong Buy with a $12.50 price target.

Analysts Brian Alexander and Adam Tindle wrote, "Flex is a leading global sketch-to-scale design chain manufacturer, with a diversified customer set in the computer, medical, automotive...and communications industries...Our positive thesis reflects continued margin expansion, improved organic growth trends...and a compelling valuation."

Shares traded recently at $10.39, up 9 percent.

Raymond James highlighted two takeaways on why they see strength in Flextronics:

1. Growth opportunities

Analysts noted that Flextronics grew every business segment organically last quarter with the company leveraging its "first-mover advantage" and design capabilities to gain valuable market share in several growing markets including the medical and automotive sector. Furthermore, Flex announced a new relationship with Nike Inc NKE which has the potential to accelerate top line growth in 2016.

2. Plan of returning capital to shareholders

Analysts at Raymond James wrote that while recent acquisitions have used a majority of the cash the company has generated, management has executed a plan of share repurchases to return capital to its investors. Furthermore, the firm believes that with strong and consistent free cash flow generation a dividend is likely to be initiated to further reward investors.