Should You Bet on SANM Stock Amid Rising Earnings Estimate Revisions?

Earnings estimates for Sanmina Corporation SANM for fiscal 2026 and fiscal 2027 have moved up 5.97% to $11.89 and 7.23% to $13.94, respectively, over the past 60 days. The positive estimate revision depicts bullish sentiments about the stock’s growth potential.

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Strong Demand From Cloud and AI Infrastructure is a Major Growth Driver

Sanmina is benefiting from the rapid expansion of its cloud and AI infrastructure business. In the third quarter of fiscal 2026, communications networks and cloud & AI infrastructure generated $2.15 billion of revenues, up 173.2% year over year. The growth is driven by multiple factors. Sanmina has been participating in multiple layers of AI infrastructure such as general-purpose computing, storage, high-performance networking, switching, routing and optical systems. Such broad portfolio offerings give the company greater exposure to opportunities as hyperscalers and other data-center customers expand infrastructure to support surging AI workloads. Sanmina’s broad end-to-end capabilities boost its competitive edge alongside major electronics manufacturing services peers such as Jabil and Flex.

The integration of ZT Systems is another major positive driver. Sanmina is combining ZT Systems’ large-scale systems integration capabilities with its own subassembly and manufacturing expertise. This combination allows it to offer customers a broader portfolio, spanning components, subassemblies and ensuring complete system integration. The integration process is going as planned. The company has already secured orders for next-generation compute programs from hyperscale and OEM clients.

Vertical Integration Strategy is Expanding Addressable Market

Rather than restricting its role to contract manufacturing, Sanmina is focusing on participating in the complete product development cycles. Its capability of supporting multiple stages of a complex product allows Sanmina to capture a larger portion of enterprise spending. End to end support from a single vendor also reduces complexity for customers. The vertical integration boosts both revenue and customer stickiness. As Sanmina becomes deeply integrated into enterprises’ supply chain, its growth prospects improve significantly.

Healthy Balance Sheet, Strong Cash Flow Brings Financial Flexibility

Sanmina continues to generate healthy operating cash flow while maintaining substantial financial flexibility to support strategic investments. At the end of the third quarter of fiscal 2026, the company held $1.84 billion in cash and cash equivalents and had no borrowings outstanding under its $1.5 billion revolving credit facility, providing total liquidity of approximately $4 billion.

As of the third quarter of fiscal 2026, the company’s current ratio stands at 1.78. A current ratio higher than unity implies that Sanmina is well positioned to pay off its short-term debt obligations.

Price Performance

Sanmina has gained 68.1% in the past year months compared with the Electronic Manufacturing Services industry’s growth of 54.3%. It has outperformed the Zacks Computer & Technology sector and the S&P 500’s growth during this period.

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Among its competitors, the company has outperformed Jabil, Inc. JBL but underperformed Flex Ltd. FLEX. Jabil has increased 51.1%, while Flex has gained 103.7%.

Key Valuation Metric of SANM

From a valuation standpoint, SANM appears to be relatively cheaper than the industry and lower than its mean. Going by the price/earnings ratio, the company’s shares currently trade at 14.28 forward earnings, lower than 18.08 for the industry and its mean of 18.5.

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End Note

AI-driven demand, ZT Systems integration, next-generation accelerated-compute programs are major growth driver for Sanmina. Healthy cash flow growth underscores efficient capital management. Upward estimate revision highlights increasing investors’ confidence in the stock's growth potential. A diverse portfolio and a vertically integrated manufacturing framework are major advantages. Hence, with a Zacks Rank #1 (Strong Buy), Sanmina appears to be a good investment option at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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