Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Citi Turns Bullish On Jabil, Says Customer Risk Concentration ‘Played Out’

Courtesy of Benzinga

Citi Turns Bullish On Jabil, Says Customer Risk Concentration 'Played Out'

The bearish case for electronic and optical manufacturing solutions company Jabil Inc (NYSE: JBL) can no longer be justified, as a notable headwind has “played out,” according to Citi.

The Analyst

Jim Suva upgraded Jabil from Sell to Buy with a price target lifted from $27 to $36. Suva also included Jabil’s stock in the research firm’s “U.S. Focus List.”

The Thesis

Bears typically argue that the case against owning the stock is rooted in customer concentration, as Apple Inc. (NASDAQ: AAPL) accounts for around 28% of all sales, Suva said in a Wednesday upgrade note. (See his track record here.) 

Apple is now showing momentum in its wearable business, which is a larger business for Jabil compared to iPhone casings, the analyst said. 

The company’s customer concentration risk eased a bit after Jabil inked a new relationship with Johnson & Johnson (NYSE: JNJ) for its medical devices business, he said. 

When the relationship is fully ramped, Johnson & Johnson will likely account for 5% of Jabil’s sales and 8% of total EBIT, Suva said. 

Jabil will host a virtual investor day in late September that could prove to be a catalyst for the stock, as management is expected to guide to the following, the analyst said:

  • Sales of $27 billion versus consensus estimate of $26.4 billion.
  • EPS of “at least” $3.40 versus consensuses at $3.37.
  • A new stock buyback program worth $350 million, or 8% of the total market cap.

Meanwhile, Jabil’s stock is trading at around nine times next 12 months EPS, which represents a discount to the five-year average of 10 times, he said.

The discount may not be warranted given potential lifts from Apple and Johnson & Johnson and expectations for Jabil to post double-digit EPS growth over the coming two years, according to Citi. 

Price Action

Jabil shares were up 7.83% at $28.23 at the close Thursday. 

Related Links:

Raymond James Upgrades Jabil On Legal Combo Of Tactical Metric Inflection, Structural Improvements

Benzinga’s Top Upgrades, Downgrades For August 29, 2019

Photo courtesy of Apple. 

Latest Ratings for JBL

Date Firm Action From To
Aug 2019 Upgrades Sell Buy
Apr 2019 Upgrades Market Perform Strong Buy
Nov 2018 Maintains Overweight Overweight

View More Analyst Ratings for JBL


View the Latest Analyst Ratings

Posted-In: Citi iPhone Jim Suva wearablesAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!