Why Jabil Circuit, Inc. Shares Jumped This Morning
What: Shares of Jabil Circuit, surged 7% today after Goldman Sachs upgraded the electronic manufacturing services specialist from Neutral to Conviction Buy.
So what: Along with the upgrade, analyst Mark Delaney boosted his price target to $20 (from $18), representing about 20% worth of upside to yesterday's close. While momentum traders might be turned off by the stock's sharp decline in recent months, Delaney believes that Jabil is too cheap to pass up given his view of a long-term earnings recovery.
Now what: Goldman still sees bumps ahead for Jabil this year, but forecasts better-than-expected growth in 2015 and beyond. "Buying quality EMS companies after severe weakness at key customers has historically led to outperformance (such as Plexus in 2013)," wrote Delaney in a report. "We expect JBL to generate $2.00-$2.50 in FCF both this year and next (a 16% CY14 FCF yield) and it is the least expensive EMS stock on 2015 EV/EBITDA (trading at 3.5X)." Given how cheap Jabil looks on an absolute and relative basis, it's pretty tough to disagree with Goldman's extra-bullish call.
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The article Why Jabil Circuit, Inc. Shares Jumped This Morning originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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