Sanmina-Sci’s Strategic Acquisition of ZT Systems: Balancing Opportunities and Challenges Amidst Market Uncertainty

In a report released today, Ruplu Bhattacharya from Bank of America Securities reiterated a Hold rating on Sanmina-Sci (SANM – Research Report), with a price target of $95.00.

Ruplu Bhattacharya has given his Hold rating due to a combination of factors related to Sanmina-Sci’s strategic acquisition and market conditions. The company recently announced its plan to acquire ZT Systems’ data center infrastructure manufacturing business from AMD, which is expected to enhance its scale and revenue from higher-margin cloud and AI sectors. This acquisition will provide Sanmina-Sci with full rack and system integration capabilities and early access to new GPU and rack designs as AMD’s preferred partner.
Despite these strategic benefits, the acquisition comes with challenges. ZT Systems is undergoing a transition, with its revenue having declined since AMD’s acquisition, and the expected annual revenue from the assets is lower than previous levels. Additionally, while the acquisition could eventually improve margins through synergies and cost efficiencies, the current macroeconomic environment remains weak, and the company faces a tough operating landscape. These factors, along with the need for program ramps to achieve scale, balance out the positives, leading to a Hold rating.