UPDATE) Flextronics Shares Hit 52-Week High Amid Positive Growth
Prospects
Dow Jones Online News, Thursday, November 19, 1998 at 16:40
NEW YORK -(Dow Jones)- Flextronics International Ltd.'s shares hit a
52-week high Thursday amid growing investor optimism about the growth
prospects of electronic-manufacturing services companies, according to
analysts.
Investors' confidence in the sector has been bolstered recently by the
companies' most recent quarterly reports, which in some cases showed
increased backlogs and other positive factors, analysts said.
A top company in the sector, Solectron Corp., told analysts at a
conference Monday that it expects total revenues for the
electronics-manufacturing services industry to increase about 25%
annually in the next few years, said company spokeswoman Lisa Werne.
Solectron's stock hit a 52-week high of $68 Tuesday and has since
dropped slightly. The shares (SLR) slipped 50 cents to close at $65.75
Thursday.
Other companies in the industry group have traded at or near 52-week highs
this week, including Jabil Circuit Inc. (JBL) and Sanmina Holdings Corp.
(SANM).
Investors believe that large original-equipment manufacturers, or
OEM's, in the electronics industry will increase the amount of business they
outsource to contract manufacturers such as Flextronics, analysts said.
"It has become evident there are some very large OEMs that are going to do
outsourcing that haven't done much so far," said Alex Blanton, analyst with
Ingalls & Snyder LLC, referring to firms such as L.M. Ericsson Telephone
Co. (ERICY) and Philips Electronics NV (PHG).
Investors are realizing that the San Jose-based Flextronics and
others are getting contracts to make products for which the large OEMs
have no capacity, Blanton said.
William Cage, analyst with J.C. Bradford, said electronic-manufacturing
services stocks were sluggish throughout most of the year because of the
Asian economic downturn but began rebounding in September.
"We're seeing a lot of institutional investors moving into these
stocks," Cage said. "...The lull hanging over the growth prospects has passed
and now things are going up."
Flextronics officials couldn't be reached for comment.
Flextronics shares (FLEX) rose $4.313, or 7.3%, to finish at $63.125
Thursday on composite Nasdaq volume of 1.3 million shares. Average daily
volume is 334,950. Earlier, the shares traded as high as $64.375, topping
the previous 52-week high of $58.875.
-By Peter Loftus;
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