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Bull Of The Day: Jabil Inc. (JBL)

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Jabil (JBL - Free Report) is one of the largest suppliers of electronic manufacturing services globally, and its shares are preparing for launch as the roaring 20s commence. This innovation-driven enterprise summed up fiscal 2020 (ending August 31st), one of the most turbulent years in recent history, with record sales and a great outlook. Analysts have been increasing their EPS estimates, following an excellent August quarter and better than expected guidance for this current quarter, pushing JBL into a Zacks Rank #1 (Strong Buy).

The Business

Jabil seems to have its hand in every advanced digital industry, from automotive electronics to cloud computing, leveraging its engineering excellence to drive innovative solutions. 

There is no better way to accurately describe a company than from "the horse's mouth." According to Jabil's capabilities page, its "network of engineers spans electrical, optical, software, mechanical, and design disciplines, and our commitment to excellence in all these areas means customers consistently receive best-in-class service. That's why top-tier brands worldwide, across a broad range of industries, partner with Jabil to address production needs from conceptual design through supply chain management."

This digitally leveraged enterprise provides comprehensive design, manufacturing, supply chain, and product management services to some of the most influential brands in the world, including Apple (AAPL - Free Report) , Cisco (CSCO - Free Report) , and Johnson & Johnson (JNJ - Free Report) .

Jabil operates over 100 plants in 29 countries, employing more than 260,000 workers. Mobility, healthcare, and cloud technology were this adaptable business's biggest drivers in fiscal 2020 (which ended August 31st).

Fiscal 2020 was a record year for this digitally driven manufacturer, illustrating over $27 billion in revenue 8% topline growth. 2020 is the 6th consecutive year that the business has shown sales expansion.

The business has over $1 billion in liquidity cash & equivalents combined with robust annual cash flows to take advantage of organic and acquisitional growth opportunities.

Where Jabil Fits Into "A New Normal"

The global economy was faced with one of the greatest challenges in recent history in the wake of the worst pandemic in a century. This 10-nanometer virus shut down the economies across the globe, disrupting supply chains, annihilating tourism revenue, and forcing 10 of millions out of a job. 

Still, in the wake of what appeared to be global chaos, technology was the saving grace, allowing most of the developed world to function effectively while in quarantine. The world was digitalized by years in only a matter of months during the pandemic. Businesses have relied on mobile devices, cloud computing, automation, as well as AI to stay operational, and this reliance is only going to grow in the years ahead. The pandemic accelerated a digital trend that was already underway.

The necessity of mobile devices, cloud technology, and other wireless markets (including 5G technology) cannot be overstated in the "new normal," with the economy now addicted to the ease and convenience that tech provides. Jabil is an industrial giant that has been well-positioned for the growing demand in these cutting-edge segments. 

JBL shares do not illustrate this business's potential as its inherent industrial sector association and slow profitability recovery have kept these shares hampered so far in 2020, still trading 21% below its December highs. JBL looks like it's finally beginning to break out of the trading rut and back up to its old highs.

Technical Analysis & Valuation

Jabil's shares are finally breaking past a resistance-level just south of $36 (represented by the yellow line) that has been the bane of long-term investors since early June. JBL hasn't seen $36 per share since the end of February. Still, JBL bulls temporarily propelled this stock past the $36 benchmark price yesterday before the broader market sold off on pessimistic stimulus outlook, provided by President Trump.

From the TradingView chart above, you can see that Jabil's shares have been bound by two key Fibonacci retracement levels roughly between $30 - $35, but as you can see, the stock appears to be on its way back towards its December highs.

Not only is JBL on the right side of industrial manufacturing for the roaring 20s, but its trading at a sizable valuation discount to it industry. The stock is trading at below 9 times price-to-forward earnings, which is not only on the lowest end of JBL's 10-year trend but sizably below the industries 11.8x forward P/E (which you can see below).

Final Thoughts

Technology is beginning to seep into every corner of the economy. Jabil and its engineering expertise are providing cutting-edge digital solutions to seemingly every segment of the market. This innovation-powered enterprise has exceptionally diverse operations that will allow the company to drive growth from the 4th industrial revolution, which is taking off amidst the Roaring 20s.

JBL is an underappreciated value play that has a sizable upside as the rapid economic recovery continues. Its currently trading 24% off its average target price, but I think these shares could go much further than that. I would not miss out on this value train, which is about to leave the station.

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