After a 21% drop, Flex trades near 17 times my fiscal 2028 earnings of $5.37 a share. The interest and preferred dividends on the EPC Power deal cancel its profit, so I see only $96.70 in twelve months. That is a hold.
Key points
- 17 times my fiscal 2028 earnings of $5.37 a share, down from 25 times guided earnings a week ago.
- $6.4 billion of new loans and 10% preferred stock pay for EPC Power, which wipes out the deal's profit for now.
- $96.70 target, 7% above the price. I cut it from $120.91.
The call
The price now asks for little. At $90.44 the stock costs about 17 times my fiscal 2028 earnings, so it only needs 16% profit growth and a peer-level multiple to hold. A week ago the price needed 20% growth at 22 times.
Revenue rising, free cash flow falling ($ billions, quarterly)Source: Flex 10-Q and 10-K XBRL facts; free cash flow is operating cash flow minus gross capex
I still expect that growth, but not a quick bounce. Cloud and power orders look solid. Free cash flow, though, fell to $40 million last quarter, and AI hardware stocks are repricing as a group after the September rate hike. Until the October 28 results show cash coming back, 18 times is a fair multiple.
Twelve-month value at each multiple of my $5.37 fiscal 2028 EPS ($)Analyst arithmetic, October 16, 2026; price $90.44
Valuation
| Item | Figure |
|---|
| Fiscal 2027 adjusted EPS, guidance midpoint | $4.58 |
| Core growth to fiscal 2028 (my estimate) | 18% |
| EPC Power profit, minus interest and preferred dividends | minus $0.03 a share |
| Fiscal 2028 EPS (my estimate) | $5.37 |
| Multiple | 18 times |
| Target | $96.70 |
What I got wrong: I set the target at 22 times and left out what the deal's debt would cost. At 18 times, Flex sits below peers that trade near 38 times trailing earnings, which allows for the messy split. The outcomes are balanced: 16 times gives $86 and 20 times gives $107, so I rate it a hold.
Risks
- Rates and AI capex: another Fed hike or a hyperscaler (giant cloud company) capex cut would push the multiple lower. Watch the November Fed decision and cloud capex guidance.
- Separation terms: Axiom could carry heavy debt, and the Amazon warrant adds dilution. Watch the November 10 Investor Day.
- Cash conversion: capex of $1.5 to $1.6 billion keeps cash thin. Watch second-quarter free cash flow on October 28.
What would change my mind
Free cash flow back above $250 million a quarter, plus guidance above $4.80 a share, would move me to buy.