Shares of Jabil Circuit (JBL) are down 65 cents, or 2.5%, at $25.33 after Needham & Co.’s Sean Hannan cut his rating on the shares to Buy from Strong Buy, but actually raised his price target to $29 from $26, writing that the stock’s “valuation gap” relative to peers has narrowed after a 33% run-up this year.
However, the company’s winning business in contract manufacturing, and demand appears “stable,” he writes.
Our conversations continue to suggest a win/new business environment at particularly strong across EMS, with some players characterizing the level of activity at historically high. In general, we believe demand has also been stable, with many OEMs more hopeful on stronger 2HC12 (as per our EMS industry piece today).
Also Jabil’s “DMS” and “materials” businesses are seeing “strong demand.”
Hannan now values the stock at 12 times the expected $2.60 per share in profit for this fiscal year ending in August, versus a 10 times multiple before.
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