RESEARCH ALERT-Merrill raises contract manufacturers
[Note: stocks down big today anyway, even with the blanket upgrade.]
LOS ANGELES, Aug 1 (Reuters) - Brokerage Merrill Lynch said it raised its ratings on six contract electronics manufacturers on Thursday, saying the stocks had significant upside at current trading levels.
Analyst Jerry Labowitz said he raised his mid-term ratings on Celestica Inc. (NYSE:CLS - News), Flextronics International Ltd. (NasdaqNM:FLEX - News), Plexus Corp. (NasdaqNM:PLXS - News) and Sanmina-SCI Corp. (NasdaqNM:SANM - News) to "Strong Buy" from "Neutral."
For Jabil Circuit Inc. (NYSE:JBL - News), he raised his mid-term rating to "Buy" from "Neutral," while for Solectron Corp. (NYSE:SLR - News) he raised his mid-term rating to "Buy" from "Neutral" while lowering his long-term rating to "Buy" from "Strong Buy."
"We believe the stocks of the leading EMS providers offer investors who build positions at these levels, significant upside potential in the coming 12 months after being beaten and bruised from the aftermath of the steepest and most vicious decline in the history of the technology world," he said in a research note to clients.
Among the reasons he cited, besides low stock prices, were the potential for a record amount of outsourcing by major companies, better cost structures through restructuring, and a greater mix of operations in low-cost production areas.
Contract manufacturing stocks have fallen sharply over the last two years as investors have fled the sector amid concerns over erosion of already-thin margins caused by a prolonged downturn, particularly in the PC and telecom markets.
In morning trade, Celestica shares were up 1.4 percent at $21.75, Flextronics shares were up 5.1 percent at $8.32, Jabil Circuit shares were up 2.9 percent at $18.30, Plexus shares were up 6.6 percent at $14.82, Sanmina-SCI shares were up 8 percent at $4.47 and Solectron shares were up 6.5 percent at $4.26. |
