Jabil shares retain Overweight rating, $155 target from JPMorgan
JBL
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On Tuesday, JPMorgan maintained its Overweight rating on Jabil (NYSE:JBL), with a steady price target of $155.00. The firm’s analyst highlighted that despite the forecasted reduction in FY24 revenue, due to broad-based weakness across several end-markets such as Autos, Industrial, Networking, and Connected Devices, Jabil’s focus on Cloud exposure has led to a strong year-to-date performance.
Even though the shares are trading at a higher multiple than historical averages, the analyst does not expect the stronger Cloud segment to fully counteract the ongoing end-market challenges.
Jabil’s FY24 revenue outlook is anticipated to face further downward revisions, with a more modest sequential revenue growth from F2Q to F4Q than previously guided.
Nevertheless, Jabil is expected to mitigate some of the revenue shortfalls through margin improvements, with forecasts suggesting margins in the range of 5.3%-5.4%, due to a favorable revenue mix and operational efficiencies. Consequently, the analyst predicts a modest decrease in FY24 EPS forecast to $8.65, down from $8.80, which mirrors the approximate 2% reduction in revenue expectations from the former estimate of $30.6 billion to $29.8 billion.
Despite the macroeconomic weaknesses, the firm believes investor attention will pivot to Jabil’s potential for growth in Cloud and its ability to offset aggregate revenue growth from the affected end-markets. Moreover, the reiteration of the EPS target of $10.65 for FY25 may lead investors to view the current macro challenges as temporary.
The analyst concludes that Jabil’s improvement in earnings quality, as evidenced by higher margins, along with its leverage to secular growth end-markets, supports the continued Overweight rating and the December 2024 price target of $155.
