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Flex Ltd.

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Flex’s ongoing transition to higher margin businesses is expected to hurt top-line growth in the near term. Sluggish growth expectation from the communication & telecom end-markets are also anticipated to hurt revenues. Moreover, continuing investments on designing and innovation related to the “Sketch-to-Scale” portfolio transition is forecasted to keep margins under pressure. Further, leveraged balance sheet is a significant concern. Higher interest expense as well as tax rate is projected to negatively impact the bottom line. Nevertheless, Flex’s diverse end-market and expanding partner base is positive. The company has evolved into an end-to-end solutions provider, which expands its total addressable market (TAM) significantly. We also note that the stock has outperformed the broader market on a year-to-date basis.


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