Raymond James Upgrades Flex Two Notches To Strong Buy

Raymond James on Friday issued a company note on Flextronics International Ltd. (NASDAQ: 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 (NYSE: 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.