Artificial intelligence (AI) infrastructure spending is reshaping the electronics manufacturing services (EMS) landscape as cloud providers and enterprises expand data center capacity. Demand for advanced networking, storage and compute platforms is creating new opportunities for manufacturers with deep engineering and production capabilities.
The EMS industry players provide design, engineering and manufacturing services to electronics original equipment manufacturers. We recommend two EMS leaders – Sanmina Corp. SANM and Jabil Inc. JBL – for investment.
These companies are strategically positioned in the EMS landscape and have the ability to cater to the evolving AI demands of business enterprises. Both stocks are currently undervalued, offering huge short-term price upside potential.
Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our two picks year to date.
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Sanmina Corp.
Zacks Rank #2 Sanmina has been benefiting from expanding cloud and AI infrastructure demand, supported by its vertically integrated manufacturing model and broader systems capabilities following the ZT Systems acquisition.
SANM has acquired AMD’s data center infrastructure manufacturing business to scale up production for cloud and AI hyperscale customers. It is positioning itself as an end-to-end manufacturing partner for AI data centers, spanning accelerated compute, AI racks, liquid cooling, networking, storage and power infrastructure.
SANM’s 42Q connected manufacturing platform improves visibility across factories and suppliers, enabling more efficient production management and faster operational decisions. The company is also expanding its addressable market by combining ZT Systems' full-system capabilities with Sanmina's internally manufactured components and advanced manufacturing technologies.
SANM serves customers across industrial and energy, medical, defense and aerospace, automotive and transportation, communications networks, and cloud and AI infrastructure markets, reducing reliance on any single end market.
Solid Estimate Revisions
Sanmina has an expected revenue and earnings growth rate of 18.6% and 16.7%, respectively, for the current fiscal year (ending September 2027). The Zacks Consensus Estimate for current fiscal year earnings has improved 1.4% in the past seven days. It has a long-term (3-5 years) growth rate of 27.4%, well above the S&P 500 Index’s current growth rate of 13.6%.
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Attractive Valuation
SANM trades at a forward 12-month price-to-earnings (P/E) multiple of 12.42X, which is significantly lower than the industry average of 22.90X and the S&P 500’s 18.04X. It has a price-to-sales (P/S) multiple of 0.74X, well below the industry average of 0.90X and the S&P 500’s 3.04X. It has a price-to-book value (P/B) multiple of 3.41X, below the industry average of 4.03X and the S&P 500’s 3.66X.
Robust Price Upside
The short-term average price target of brokerage firms represents an increase of 58.1% from the last closing price of $169.76. The brokerage target price is currently in the range of $210-$300. This indicates a maximum upside of 76.7% and a maximum no downside.
Jabil Inc.
Zacks Rank #1 Jabil is gaining from sustained strength in AI infrastructure demand, which continues to support growth across its Intelligent Infrastructure business. This growth is being driven by strong customer demand, disciplined execution and capabilities spanning compute, storage, networking, optics, power, cooling and rack-level integration.
JBL's future growth will come from expanding AI infrastructure and will be backed by capacity additions, broader customer relationships and improving demand across several non-AI markets. AI-related demand continues to accelerate, supported by cloud infrastructure, networking, power, cooling and semiconductor equipment. JBL expects six Intelligent Infrastructure customers to each generate more than $1 billion in fiscal 2027.
JBL’s focus on end-market and product diversification remains a key long-term catalyst. Management continues to target a balanced portfolio so that no individual product or product family becomes an outsized contributor to operating income or cash flow.
This strategy improves the stability of earnings through industry cycles while allowing the company to capture opportunities across AI infrastructure, healthcare, industrial and automation markets. Better-than-expected performance in automotive and connected living further demonstrates the benefits of this diversified operating model.
Solid Estimate Revisions
Jabil has an expected revenue and earnings growth rate of 24.1% and 34.5%, respectively, for the current year (ending August 2027). The Zacks Consensus Estimate for current-year earnings has improved 6.1% over the past 30 days. It has a long-term (3-5 years) growth rate of 20.1%, well above the S&P 500 Index’s current growth rate of 13.6%.
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Attractive Valuation
JBL trades at a forward 12-month price-to-earnings (P/E) multiple of 15.80X, which is significantly lower than the industry average of 22.90X and the S&P 500’s 18.04X. It has a price-to-sales (P/S) multiple of 0.81X, well below the industry average of 0.90X and the S&P 500’s 3.04X.
Robust Price Upside
The short-term average price target of brokerage firms represents an increase of 56.4% from the last closing price of $277.18. The brokerage target price is currently in the range of $378-$475. This indicates a maximum upside of 71.4% and no downside.
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This article originally published on Zacks Investment Research (zacks.com).