Shares of Flex Ltd. (FLEX) closed nearly 3% higher at $147.61 on Thursday, with about 80.7 million shares changing hands, as the market positioned for the company's upcoming addition to the S&P 500 index. The move comes ahead of the official index change scheduled before the open on Monday, June 22, following the Juneteenth market holiday on June 19.
S&P Dow Jones Indices announced that Flex will join the S&P 500, replacing its position in the S&P MidCap 400. The addition is part of the quarterly rebalance, which also includes Marvell Technology (MRVL). This index reshuffling often triggers forced buying by passive funds that track the S&P 500, as they must adjust their portfolios to match the new composition. Reuters has noted that such buying can temporarily lift shares of newly added companies.
Flex's inclusion is more than just a mechanical index event, according to CEO Revathi Advaithi, who called it a "landmark milestone" that validates the company's transformation and growth strategy. The company, traditionally known for electronics assembly and supply chain services, is increasingly gaining attention as a supplier of components for AI data centers, including power, cooling, and hardware solutions. Flex operates approximately 150,000 employees across more than 100 sites in about 30 countries.
Spin-Off and Financial Outlook
In a significant strategic move, Flex announced in May its plan to spin off its Cloud and Power Infrastructure segment as a separate publicly traded company, tentatively named SpinCo. The spin-off is expected to close in the first quarter of fiscal 2027, with Advaithi set to lead the new entity, while Michael Hartung will become CEO of the remaining Flex business. The company has set ambitious targets for SpinCo, projecting revenue growth of 65% to 75% in fiscal 2027 and over 80% in fiscal 2028, while the remaining business is expected to grow at a low-to-mid-single-digit rate.
For the fourth quarter of fiscal 2026, Flex reported net sales of $7.5 billion, with full-year fiscal 2026 net sales reaching $27.9 billion. Looking ahead, the company has guided for fiscal 2027 net sales in the range of $32.3 billion to $33.8 billion, before accounting for the planned spin-off.
Market Reaction and Analyst Views
The broader market also rallied on Thursday, with the Nasdaq Composite gaining 1.91% and the S&P 500 rising 1.08%. However, the performance of Flex's peers was mixed: Jabil (JBL) and Celestica (CLS) declined, while TTM Technologies (TTMI) advanced. This divergence suggests that Flex's price move was largely driven by index inclusion rather than a sector-wide tailwind for contract manufacturers.
Analysts have taken note of Flex's evolving story. Barclays initiated coverage with an Overweight rating and a $203 price target on June 4, according to Benzinga data. Other recent ratings include Freedom Capital Markets and Goldman Sachs, reflecting growing analyst interest.
Risks and Outlook
Despite the positive momentum, risks remain. Index-related buying can pull demand forward without creating lasting value. Flex has cautioned that the spin-off may not close as planned, could exceed budget, or miss its targets. Additionally, if AI data center spending slows or if capital expenditures and ramp-up costs come in higher than expected, the valuation case could weaken.
For now, the market is embracing a simpler narrative: Flex is an upcoming S&P 500 name with exposure to AI energy and cooling, rather than just a low-margin assembler. The real test will come after Monday, when passive buying subsides and investors shift focus to orders, margins, and the details of the spin-off filings.
