Electronic manufacturing services provider Plexus (PLXS) has been suffering from persistent supply chain constraints in the components industry. Moreover, it faced challenging conditions in its Penang, Malaysia, factory, stemming from government-mandated downsizing in the workforce in response to the pandemic. Also, volatile end-markets might continue to hang heavy over Plexus’ top-line, at least in the near term.

Nonetheless, global expansion efforts, new program wins, and expanding manufacturing opportunities hold promise for Plexus. Moreover, a growing footprint in healthcare/life sciences is a key growth driver. Thus, I have a neutral stance on the company. (See Plexus stock chart on TipRanks)

Recently, Needham analyst James Ricchiuti hosted the management at Plexus at a non-deal roadshow, to gain further insights into the company’s plans and developments.

Management assured that the business is successfully withstanding the challenges and going strong across most verticals. The company confidently projected double-digit year-over-year growth in revenues in the fiscal year 2022 (FY22), despite the ongoing component supply issues.

Management believes that Plexus is placed suitably enough to achieve 10% or more year-over-year growth in Industrial, Healthcare & Life Sciences, and Aerospace & Defense verticals in FY22.

The Aftermarket Services business also seems to be growing stably. Management expects growth in this area to contribute a high-single-digit percent of total revenues.

Ricchiuti was encouraged by the position of Plexus, going into FY22. He further believes that the company’s target of reaching $5 billion in revenues and 5% in GAAP operating margin by Fiscal 2025 seems to be achievable, given the continued strength in its high-margin businesses of Engineering Solutions and Aftermarket Services.

“While COVID and component constraints have taken some wind out of Plexus’ sails over the past year, the company’s continued high win-rate and healthy funnel speak to the underlying strength of the business across most of its major market verticals,” noted Ricchiuti.

The analyst concluded that the positives outweigh the negatives of Plexus, and reiterated a Buy rating with a price target of $108. Moreover, he also increased his revenue estimate for the fourth quarter of Fiscal 2021 to $890 million from $882 million, and that of GAAP earnings per share to $1.22 from $1.20.

However, Wall Street seems to be cautiously optimistic about the company, with a consensus rating of Moderate Buy. The average Plexus price target of $104.6 indicates 16% upside potential from the current level.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

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The post Plexus' Plans Spur Growth Potential appeared first on TipRanks Financial Blog.

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By: Chandrima Sanyal
Title: Plexus' Plans Spur Growth Potential
Sourced From: blog.tipranks.com/plexus-plans-spur-growth-potential/
Published Date: Mon, 13 Sep 2021 11:15:28 +0000

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