In a recent analysis, Morgan Stanley analysts have downgraded Zebra Technologies (ticker: ZBRA) and adjusted their price target, highlighting concerns over the company’s valuation. The revision in rating comes as a blow to the automation equipment company, whose stock took a 6.1% dip to $236.90 during afternoon trading. This drop brings it close to its lowest closing point since November 9, 2022, when it stood at $226.88.
The Morgan Stanley team predicts a delayed demand recovery due to excessive production during the pandemic and reduced consumer spending. Consequently, they anticipate challenges in maintaining current valuation as earnings might be affected over the next 12 to 24 months.
While analysts foresee eventual earnings rebounding to pre-pandemic levels, they express doubt about achieving the extraordinary earnings witnessed in 2021 and 2022. Consequently, they believe that the current valuation is unjustifiably high. As a result, they have lowered their price target and adjusted the price/earnings multiple from 20 times to 16 times.
Despite the downgrade, Zebra Technologies remains an influential player in the market with a strong potential for growth and recovery. Industry watchers will closely monitor the company’s performance in the coming months to see if it can overcome the challenges presented by its valuation concerns and establish a sustainable path forward.
