Flex (FLEX): Valuation in Focus After Power Management Deal With Renesas Targets AI Data Center Growth

Flex (FLEX) just made headlines with its Power Modules subsidiary announcing a new partnership with Renesas, a major name in semiconductor technology. This collaboration aims to bring next-generation power management solutions to AI-focused data centers, promising faster design cycles and lower system costs. For investors, this step looks well timed as AI workloads continue to reshape IT and power infrastructure investment, making the event especially relevant for those weighing Flex’s role in the rapidly expanding data center space.

Over the past year, Flex’s stock has caught attention with a strong 78% return, and momentum has only gained speed this year with a surge of more than 50%. This is not happening in a vacuum, as Flex has posted healthy revenue and net income growth while pursuing new tech partnerships and responding to broader AI industry shifts. The partnership with Renesas highlights management’s determination to keep Flex in the mix for next-generation AI hardware opportunities.

After such a rapid climb, the key question for prospective buyers is clear: Is Flex still undervalued, or is the market already incorporating the growth that partnerships like this could provide?

Most Popular Narrative: Fairly Valued

According to the most widely followed narrative, Flex is trading very close to fair value. Analysts' consensus shows little difference between the current share price and their fair value estimate.

The ongoing surge in demand for data center and AI infrastructure, requiring integrated power, cooling, and advanced IT hardware, positions Flex for sustained, outsized revenue growth. This is evidenced by the 35% forecasted annual increase in its data center segment, supporting both topline expansion and higher portfolio margins.

Curious about the hidden financial drivers behind Flex's fair value? The story centers on high-margin segments, a major revenue shift, and future profit multiples you might not expect from a name like this. Want to know what the consensus sees in Flex’s future? The numbers behind the current price may surprise you.

Result: Fair Value of $57.86 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing reliance on a handful of major clients and persistently thin margins could quickly change Flex’s growth outlook if conditions shift.

Find out about the key risks to this Flex narrative.

Another View: Discounted Cash Flow Perspective

Looking from another angle, our DCF model suggests that Flex is trading near its estimated fair value as well. This method considers future cash flows rather than focusing solely on market sentiment. However, could different growth assumptions change this outlook?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Flex for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Flex Narrative

If you see things differently or want to test your own ideas against the data, you can shape your own take in just a few minutes, and Do it your way.

A great starting point for your Flex research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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