Zebra Technologies (NASDAQ: ZBRA) could be a value investment because it supplies a vital technology most people do not think about: barcodes.
To explain, Zebra’s products include: bar code scanners and barcode printers. In addition, Zebra manufactures mobile computers and tablets designed to read barcodes. Other products at Zebra include: radio frequency identification (RFID) tags, location technologies, interactive kiosks, and OEM 1D and 2D scan engines and devices.
Thus, Zebra builds many of the devices fulfillment centers need to operate. For example, fulfillment centers use RFID tags, and barcodes to keep track of packages, products, and shipments.
How Zebra Technologies could grow with Amazon
For example, the robots at an Amazon (NASDAQ: AMZN) or Ocado Group PLC (LON: OCDO) fulfillment center could identify products they pull by reading barcodes. In addition, Walmart (NYSE: WMT) is testing robots that monitor inventory levels by reading barcodes.
Moreover, Amazon and UPS (NYSE: UPS) delivery people use barcode scanners to track the packages they deliver. Delivery is a growing business, particularly at Amazon.
Amazon’s delivery van fleet grew to 30,000 vehicles in December 2019, PYMNTS.com claims. Amazon’s growth could help Zebra because each of those delivery vehicles will need a barcode scanner, tablet, or mobile computer.
Is Zebra Technologies a Good Stock?
Mr. Market is a Zebra (NASDAQ: ZBRA) bull. He was paying $277.06 a share for Zebra on 8 June 2020.
Zebra’s share price has grown since the coronavirus epidemic began. Zebra shares started 2020 at $259.14 on 2 January and rose to $277.55 on 5 June 2020 and $277.06 on 8 June 2020. Thus, Zebra survived makes more money in the pandemic.
I think the coronavirus is good for Zebra because it is increasing the use of delivery and e-commerce. Hence, COVID-19 creates more demand for Zebra’s products.
Is Zebra Technologies Making Money?
Zebra’s revenues, income, and gross profit shrank in the first quarter of 2020. For example, Zebra’s quarterly revenues shrank from $1.192 billion on 31 December 2019 to $1.052 billion on 31 March 2020.
In addition, Zebra’s quarterly gross profit fell from $544 million to $473 in the same period. Plus, Zebra’s quarterly operating income shrank from $188 million to $151 million.
Notably, Stockrow estimates that Zebra’s revenue growth shrank by 1.31% in the quarter ending on 31 March 2020. In contrast, Zebra’s growth grew by 4.84% in the quarter ending on 31 December 2019.
Finally, Stockrow’s quarterly common net income fell from $169 million on 31 December 2019 to $89 million on 31 March 2020.
How Much Cash Does Zebra have?
Zebra’s quarterly operating cash flow fell from $265 million on 31 December 2019 to $108 million on 31 March 2020. However, Zebra’s ending cash flow rose from -$3 million on 31 December 2019 to $24 million on 31 March 2020.
Importantly, I do not think Zebra borrowed money during the first quarter of 2020. Notably, Zebra’s financing cash flow rose from -$245 million to -$98 million in the first three months of 2020.
Unfortunately, Zebra Technologies has less cash. For example, Zebra’s cash and short-term investments fell from $61 million on 31 March 2019 to $30 million on 31 December 2019 to $24 million on 31 March 2020.
Overall, Zebra had $4.540 billion in total assets on 31 March 2020. Conversely, the value of Zebra’s total assets fell from $4.711 billion on 31 December 2019.
Demand for Zebra’s Products grows
Thus, Zebra has less cash and less value, yet its share price is growing dramatically. My guess is that investors think Zebra will grow as online retailers such as Walmart and Amazon expand.
Notably, the demand for online retail solutions is growing dramatically. Amazon, for example, put new grocery delivery customers on a waiting list in April 2020, USA Today reports. Furthermore, Kroger is constructing three innovative Customer Fulfillment Centers (CFC) and plans three more.
In the CFCs, Kroger will use Ocado robots and artificial intelligence (AI) to pull and pack grocery orders. Specifically, Kroger plans to build new CFCs in the Great Lakes, Pacific Northwest, and West Regions, Chain Store Age reports.
Zebra has Growth Potential
Kroger is building CFCs in Groveland, Florida, Monroe, Ohio, and Fredericksburg, Maryland. Kroger plans additional CFCs in Pleasant Prairie, Wisconsin, the Atlanta area, and the Dallas-Fort Worth region.
Theoretically demand for Zebra’s products is growing as the demand for ecommerce products increases. Consequently, Zebra is one company profiting from the growing Retail Apocalypse.
If you are looking for an obscure tech stock with growth potential and some value attributes, Zebra Technologies (NASDAQ: ZBRA) is worth investigating. On the other hand, I think Mr. Market grossly overpriced Zebra at $277.06 on 8 June 2020.
I believe that price makes Zebra too expensive and too unsafe for ordinary investors to buy.