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Zebra Technologies Corp Class A ZBRA

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Morningstar’s Analysis

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Zebra Keeps Enjoying Strong Demand in Q3, and We Think Cost Headwinds Are Short-Term; FVE Up to $430

Analyst Note

| William Kerwin |

We’re raising our fair value estimate for narrow-moat Zebra Technologies to $430 per share from $400 after the firm reported third-quarter results above its guidance and raised its full-year outlook. We think customers have increased their adoption of Zebra’s digital transformation solutions as a result of the COVID-19 pandemic accelerating trends toward omnichannel retail and e-commerce. We are also impressed by management’s ability to manage gross margin despite ongoing logistics challenges wrought by the pandemic. We think our long-term thesis for margins to sustainably expand with the mix of software and services will continue to play out as current cost headwinds abate. We expect Zebra to continue its steady trajectory of growth into 2022, led by its differentiated mobile computing and software-based solutions. Nevertheless, we find the current market valuation challenging; we think it implies more rapid margin expansion than is feasible and view the shares as overvalued.

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Company Profile

Business Description

Zebra Technologies is a leading provider of automatic identification and data capture technology to enterprises. Its solutions include barcode printers and scanners, mobile computers, and workflow optimization software. The firm primarily serves the retail, transportation logistics, manufacturing, and healthcare markets, designing custom solutions to improve efficiency at its customers.

3 Overlook Point
Lincolnshire, IL, 60069
T +1 847 634-6700
Sector Technology
Industry Communication Equipment
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 8,800