On Tuesday, Citi research firm initiated coverage on shares of Zebra Technologies, traded on NASDAQ under the ticker NASDAQ:ZBRA, assigning a Neutral rating and setting a price target at $430.00.
The new coverage reflects a measured perspective on the company's prospects, acknowledging Zebra's solid market position and potential benefits from long-term trends in automation and digitization. Currently trading at $381.69, InvestingPro analysis suggests the stock is trading above its Fair Value, with analyst targets ranging from $363 to $468.
Zebra Technologies, recognized for its strong market presence, is expected to see organic sales growth of 5%-7% and double-digit EPS growth over time, according to Citi analysts. With current annual revenue of $4.66 billion and EBITDA of $803 million, the company has demonstrated its market strength.
This growth is anticipated as the company capitalizes on increasing trends towards automation and digitization across various industries. InvestingPro subscribers can access 8 additional key insights about Zebra's growth potential and financial health.
Despite the positive outlook on the company's growth potential, Citi analysts expressed a cautious stance due to mixed consumer sentiment and constraints on capital expenditure budgets. The discretionary nature of spending on automation technologies also contributes to the firm's tempered enthusiasm regarding Zebra's near-term prospects.
Citi also noted that while Zebra's recent mergers and acquisitions are strategic, their long-term value remains to be proven. The company's improved leverage, however, is seen as favorable for the potential acceleration of capital deployment.
The valuation of Zebra Technologies is currently considered high by Citi, trading at 1.12 times the S&P, compared to its 15-year average of 1.04 times but in line with its 5-year average. This valuation reflects market expectations of a strong earnings recovery around 2025-2026, which Citi believes sets a high performance benchmark for the company and justifies their decision to remain on the sidelines for the moment.
In other recent news, Zebra Technologies has announced its plans to acquire Photoneo, a top developer of 3D machine vision technology, aiming to strengthen its presence in the rapidly growing machine vision market. This move is expected to yield a comprehensive suite of solutions for complex use cases in various sectors.
In addition, Zebra Technologies' stock rating has been upgraded from Underweight to Equalweight by Morgan Stanley (NYSE:MS), due to the company's recovery in retail and distribution capital expenditure.
Moreover, Zebra Technologies has reported a substantial increase in Q3 sales and earnings. The company announced Q3 sales of nearly $1.3 billion, marking a 31% increase, and non-GAAP diluted earnings per share of $3.49, a 300% rise from the previous year. These developments are a result of strong performances across all primary end markets, including mobile computing, data capture, and printing.
Furthermore, Zebra Technologies has raised its full-year outlook, expecting continued growth in sales and adjusted EBITDA margins. Despite some uncertainties, the company remains optimistic about its future. These recent developments highlight Zebra Technologies' commitment to growth and innovation.
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