We raise our 12-month price target by $3 to $16, based on 12.9x our FY 21 (Mar.) EPS estimate, above electronic manufacturing services (EMS) peers at 10.5x, and warranted by FLEX's growing opportunity in adjacent markets (solar with NEXTracker). We lift our FY 21 EPS estimate to $1.24 from $1.14 and FY 22's to $1.39 from $1.36. FLEX posts Sep-Q adj-EPS of $0.36 vs. $0.31, topping consensus by $0.09. The beat was driven by adj-EBIT margin expansion (4.1% vs. 3.6%) on better mix and lower SG&A (down 5% YoY). Sales were down 1.7% to $5.99B, but beat the $5.54B consensus on a strong sequential recovery in automotive, which pushed Reliability Solutions higher by 6% YoY. FLEX's sequential Dec-Q outlook was favorable, calling for revenue of $6.0B-$6.4B (vs. $6.0B) and adj-EPS of $0.34-$0.40 (vs. $0.32), despite moderating demand in higher-growth areas, like Medical. Following the recent rally in share price, we think catalysts around FLEX's NEXTracker assets have now been partly built into the valuation.
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