The stock of Zebra Technologies continues to lag behind the overall market.

Last Updated: 5. Dezember 2023By

The keywords automation and artificial intelligence (AI) are on everyone’s lips. In particular, the field of data capture and its subsequent processing can be significantly improved with Artificial Intelligence (AI). A player in this field is the US company Zebra Technologies, which has been able to score with enormous growth rates in recent years. However, the stock is lagging far behind the broad stock market this year with a share price drop of around 7% (S&P 500: +19%).

What are the reasons? What are the future prospects and how are the analysts currently assessing the stock’s potential?

Zebra Technologies: The Specialist in Data Capture and Processing Although the company may be relatively unknown in this country, Zebra Technologies is by no means a startup. The company was founded in 1969 and now employs over 10,500 people. The Illinois-based company specializes in the manufacture of barcode printing and reading technologies.

The company is also a provider of Enterprise Asset Intelligence and produces applications for machine and process control. Examples of these products and processes are data capture systems such as printers, barcode scanners, as well as real-time tracking systems and radio frequency monitoring modules.

Data availability drives automation forward Zebra Technologies benefits from the automation wave that is rolling through numerous industries. The increasing spread of IT and internet-based automation in retail, logistics and production means that more and more data needs to be captured and analyzed. This is where Zebras products come into play.

The mobile computers and RFID (radio frequency identification) devices capture a lot of data in real time, which helps companies to monitor their robots and increase productivity. This goes so far that even players in the National Football League (NFL) are equipped with RFID tags to monitor their performance in real time.

Strong expansion in recent years… With its positioning, the US company achieved considerable growth rates in the past years. Since 2014, revenues rose from $1.67 billion to $5.78 billion in 2022. At the same time, profit improved from $32 to $463 million.

….but growth slump in the third quarter Recently, however, the engine has stalled: corporate customers are delaying their investments, which led to significant braking marks in the figures. Likewise, the inventory reduction of the customers caused headwinds: sales in the third quarter fell by 30.7% to $956 million. Thus, the sales decline accelerated (Q2: -17.3%; Q1: -1.9%). However, the sales estimates of the analysts were exceeded by $23.17 million.

The adjusted was also above the estimates of 81 cents per share with 87 cents per share in the reporting period.

No improvement in the final quarter Disappointing for investors, however, was the company’s forecast. For the final quarter, the management of Zebra now expects a sales decline of 32% to 36%. The adjusted earnings are expected to be between $1.40 and $1.80 per share.

Analysts see only moderate stock potential In the meantime, analysts remain cautious despite the weak share price performance. The bankers expect earnings per share for the full year 2023 to be $9.76 (Source: Seeking Alpha). This gives a price-earnings ratio of around 25. With a current market value of $12.4 billion, Zebra is also valued at 2.7 times the expected revenue for 2023.

In summary, the analysts currently only assign the stock moderate potential. The average target price of the 13 analysts who are dealing with the stock (Source: Marketwatch) is around 10% above the current level at $264.20.