Zebra Analysts Upgrade Stock, Forecasting Major Reversal

Key Points

• Zebra Technologies hit bottom in 2023 and is on the cusp of completing the reversal in 2024. 
• Analysts and institutions are leading this market to new highs. 
• A return to growth and wider margins are expected, and the outlook could be cautious given the upcoming AI upgrade cycle. 

Zebra Technologies NASDAQ: ZBRA stock hit bottom in 2023, but it took until this year for the reversal to be completed. Now, the stock is up 50% from the recent low and heading higher under the influence of analysts. Analysts' sentiments also bottomed during the last twelve months, and a reversal in sentiment is in play. The trends in 2024 include upgrades and upward price target revisions that have sentiment back to Moderate Buy from Hold and the price target up 20% in the last three months. Assuming the market follows through on these signals, ZBRA stock could gain at least 5% to 7% soon and open the door to another 50% increase over the next twelve to eighteen months. 

The Sell-Side Supports Zebra’s Stock Price Reversal 

Among the latest analysts' coverage is an upgrade from BNP Paribas. BNP analysts raised the sentiment rating to Hold from Neutral and set a $305 price target. Their price target assumes fair value near current trading levels but is 7% below the consensus, and most of the recent targets have led the market to the high end of the target range. Recent coverage also includes being added to Goldman Sachs’ High Operating Leverage stocks list. High operating leverage stocks can boost sales at lower costs, widening profit margins and producing industry and/or market-leading performance. 

Institutional support is also helping to usher Zebra stock into a complete reversal. The institutional activity has been mixed over the last year to 18 months but has been net bullish for three consecutive quarters, three of the last four quarters, and four of the last six. Ownership is broad, with many shares held by funds, including midcap, value, and midcap value-focused strategies. Total ownership has doubled in the last three years, showing a high level of conviction. Institutional activity also coincides with the market bottom. Investors may expect to see some rotation and profit-taking with shares moving higher, but this trend remains intact, helping support upward movement in the share price this year. 

Zebra Reaches Inflection Point; Growth To Resume This Year

Zebra Technologies struggled in Q1 with weakness in the end markets, leading to a year-over-year contraction. However, the quarter was better than feared, leading management to increase guidance. Salient details are improving margins, and growth is expected to resume in the back half. Based on the current outlook, management expects mid-single to low-double-digit quarterly advances; analysts are raising their estimates and forecast growth to persist at this rate in F2025. 

Drivers of business include the company’s leading position in data capture (think all those remote ID, bar code, and CC scanning devices you see everywhere) and the upcoming AI-inspired upgrade cycle. 

Zebra is building shareholder value through its lean into efficiency and growth investments. The company doesn’t pay dividends or repurchase shares aggressively but has improved the balance sheet and shareholder equity over the past twelve months. Cash is down compared to last year but offset by flat current and total assets, debt reduction, liability reduction, and increased equity. The debt leverage is now less than 0.7x equity and 0.3x assets, leaving the business in a lean, nimble position to invest as needed. 

Zebra Technologies Technical Outlook is Bullish

The technical outlook for ZBRA is bullish, but there is a hurdle. The market is set up to complete a reversal pattern but faces resistance at the baseline. As it is, the market has pulled back to form another shoulder, and support may be confirmed soon. In this scenario, shares of ZBRA should retest the highs near $335 and $350 shortly after and could break to a new high by the end of the year. If not, this technology stock will remain range-bound until more data is available later in the year. The question is whether the economy can continue on its current course through year-end without an FOMC interest rate hike.