Zebra Earnings: 2024 Outlook Implies Stabilizing Demand, and Shares Look Closer to Fair Value

We trim our fair value estimate for narrow-moat Zebra Technologies to $320, from $345, as we temper our medium-term recovery thesis. Zebra's outlook for stabilizing demand in 2024 met our model, but we now see 2024 as a base from which normalized growth can resume, rather than a depressed level to be followed by a snapback in revenue. Zebra suffered from a combination of distributor inventory destocking and order pushouts in 2023, hampering sales. We believe weak 2023 sales reflected a correction from the surge of post-pandemic orders Zebra accrued in 2021. We continue to expect mid single digit midcycle growth for the firm, and like its wide and sticky portfolio of solutions for digital transformation. With shares up 12% on a growth outlook for 2024, we now see Zebra stock as only modestly undervalued.