Sanmina: Becoming An AI Play With And For AMD

(9min)

Summary

  • Sanmina's $3B acquisition of ZT Systems' data center business is transformative, boosting AI exposure and nearly doubling the revenue base.
  • The deal is valued at 0.5x sales, similar to Sanmina's own valuation, but margin details remain limited, causing investor caution.
  • Despite a negative share reaction, leverage remains manageable, and the deal could add $1+ to EPS if conservative assumptions hold.
  • I've initiated a small position on the dip, with the intent to add more as clarity on deal synergies and margins emerges.
  • Looking for a helping hand in the market? Members of Value In Corporate Events get exclusive ideas and guidance to navigate any climate. Learn More »
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Paperkites

Just over a month ago, I believed that shares of Sanmina (NASDAQ:SANM) were fairly re-rated after stabilization arrived. Little could I have imagined that a big M&A deal was going to be announced just a month later.

The company announced

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This article was written by

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The Value Investor has a Master of Science with specialization in financial markets and a decade of experience tracking companies via catalytic company events.

As the leader of the investing group Value In Corporate Events they provide members with opportunities to capitalize on IPOs, mergers & acquisitions, earnings reports and changes in corporate capital allocation. Coverage includes 10 major events a month with an eye towards finding the best opportunities. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SANM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Bought a small speculative position, with intention to increase.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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