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Zebra Technologies: Scan The Barcode To Buy The Dip


  • Zebra Technologies is a leader in automatic identification and data capture that includes barcode scanners, specialty labeling, and related software.
  • The company is profitable and free-cash-flow positive but exposed to cyclical risks, given customer base in industrial and retail segments.
  • A selloff from highs earlier in the year may represent a buying opportunity for steady growth and reasonable valuation.
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Zebra Technologies (NASDAQ:ZBRA), with a market cap of $10 billion, is a leader in automatic identification and data capture that includes barcode scanners, specialty labeling, and related software. Zebra is benefiting from trends in cloud computing, enterprise mobility, and automation as it continues to innovate with new products and solutions. The company reported Q4 results back in February with a record year for earnings despite a challenging macroenvironment in 2019 with weaker trends in the Asia-Pacific region. This year, the ongoing coronavirus outbreak represents a new headwind but we think the current selloff in shares of ZBRA can represent a buying opportunity for a high-quality tech stock at a reasonable valuation.

(Source: finviz.com)

ZBRA Q4 and Fiscal 2019 Earnings Recap

Zebra Technologies reported its fiscal Q4 earnings on February 13 with non-GAAP EPS of $3.56 which missed expectations by $0.09. Similarly, quarterly revenue at $1.19 billion was up by 4.4% year over year but $10 million below the estimates. The company highlighted an overall strong performance in the U.S. and EMEA regions while China was more tepid, continuing trends observed along 2019.

(Source: Company IR)

Financially, this was a solid year for the company. GAAP EPS climbed 28.5% compared to 2018 while the non-GAAP EPS measure reached $12.94, up 17.5% year over year. While EPS reached a record level, gross margin was pressured based on tariff-related expenses leading Zebra to prioritize certain products impacting the product mix. Nevertheless, the adjusted EBITDA margin for the quarter and the full year increased, driving higher net income. Management made the following comments in the conference call summarizing the results:

Our diversified business is enabling us to post solid growth despite an uneven global macro economy. The continued soft environment in China was more than offset by growth in our North America and EMEA regions. We

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This article was written by

Dan Victor, CFA profile picture

Dan Victor, CFA is a market professional with more than 15 years of investment management experience across major financial institutions in research, strategy, and trading roles. Dan is the president of Posto Asset Management - a startup investment advisory firm based in Miami Beach, Florida.

Dan leads the investing group Learn more

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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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Comments (3)

Dan Victor, CFA profile picture
Thanks for reading. Consider following to hear about our next idea!
@BOOX Research enjoyed the article, and thank you. your sentence ' "sticky" ecosystem' could not be more accurate.

long since 5/17. agnostic as to daily sp. it's a decades-long holding for me.
Thanks for the article, I appreciate the point of view.

ZBRA struggled in the 2016 time frame, but seemed to have good forward looking prospects; i'd regretted not buying some below $100.

I think current market action will remain unsettled for a bit yet, but I had a chance to buy ZBRA at $187.95, so I bought a very little bit as a sort of 'tracker' position. While I agree with your assessment of ZBRA's risk profile, one of the big plusses related to this firm's financial profile, that you also note, is ZBRA's ability to generate operating cash flow; love the financial flexibility this provides. More fundamentally, I love the exposure to industrial automation.

Best of luck to all.
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