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They told investors in a note that the pace of the company’s recovery is likely slower than expected.
ZBRA is a “high-quality company, but growth headwinds challenge [the] growth rebound for next 12-24 months,” wrote the analysts. “Weaker consumer data points, inventory digestion, and more secular headwinds around capacity absorption post COVID e-commerce overbuild meaningfully lowers our expectations of ZBRA’s run-rate earnings power over at least the next 12-24 months, causing challenges in maintaining current valuation.”
“As a result of these headwinds, we tend to think that eventual run-rate earnings will be elevated to what we saw pre-COVID, but nowhere near 2021/2022 levels, causing earnings power to be closer to ~$13-15 vs. $18 at peak (vs. Street estimates for 2025 EPS north of $16),” the analysts added.
Given the longer-term earnings power that Morgan Stanley believes will come in over the next year for the company, they think the risk-reward is skewed negatively over the next 12 months.
Even so, they stated: “ZBRA is a name that we continue to feel has upside opportunity on a multi-year basis given exposure to digitizing end markets like retail/manufacturing/transportation and logistics, growing software exposure, and attractive positioning in key growth areas like Machine Vision and RFID, but view near-term headwinds as more meaningful than currently contemplated.”
