Zacks reaffirms Hold rating for Jabil Circuit, Inc. (NYSE:JBL) and Tesla Motors...

Zacks reaffirms Hold rating for Jabil Circuit, Inc. (NYSE:JBL) and Tesla Motors Inc (NASDAQ:TSLA)

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There are growth opportunities for Jabil Circuit, Inc. (NYSE:JBL) in non-traditional markets:

 

Zacks has a neutral outlook on Jabil Circuit, Inc. (NYSE:JBL), rating the stock a Hold. Jabil is a leading provider of electronic manufacturing services whose profits and revenues in the recently reported F1Q2016 exceeded Zacks consensus estimates. The company posted EPS of $0.72 on revenue of $5.21 billion. Zacks consensus called for EPS of $0.70 on revenue of $5.19 billion for the quarter.

 

However, in its latest assessment of Jabil Circuit, Inc. (NYSE:JBL), Zacks suggests the company’s opportunities and risks balance off, which is why it is comfortable maintaining a Hold rating on Jabil.

 

The negatives:

On the negative side, Zacks notes that Jabil’s high customer concentration at the top poses a serious risk to its business. The company’s top five customers account for a significant portion of its income, which means that loss of any one of those key customers can have material adverse impact on Jabil’s revenues and profits.

 

The other pressure that Zacks sees around Jabil Circuit, Inc. (NYSE:JBL) is competition in its industry. In particular, Zacks notes that Jabil’s rivals have continued to get better.

 

Positive remarks:

On a positive note, Zacks cites that Jabil Circuit, Inc. (NYSE:JBL) is positioned to benefit from the trends in emerging (non-traditional) electronics manufacturing markets. Additionally, Zacks notes that the company has financial flexibility given that it ended the last quarter with about $1.1 billion in cash and equivalents.

 

The fact that Jabil Circuit, Inc. (NYSE:JBL) is exposed to Apple Inc. (NASDAQ:AAPL) in the iPhones business also makes Zacks believe that the company stands on fertile grounds.

 

Tepid interest in electric vehicles a challenge for Tesla Motors Inc (NASDAQ:TSLA):

 

After careful assessment of Tesla Motors Inc (NASDAQ:TSLA)’s situation, Zacks isn’t inspired to lift its rating for the stock. As such, Zacks maintains Tesla on the Hold list, but highlights that the company has compelling growth catalysts, which are no doubt offset by some potential headwinds.

 

Overseas expansion, investment in infrastructure and improvement of factory capacity are some of the potential growth drivers Zacks sees in Tesla Motors Inc (NASDAQ:TSLA). However, those are somewhat offset by mounting losses, growing expenses, tepid demand for electric vehicles and shortage of component supplies, especially battery cells. Tesla Motors Inc (NASDAQ:TSLA)’s 3Q loss was wider than Zacks expected but revenue impressed.
Overall, Zacks sees Tesla’s opportunity and risks fairly balanced off, thus the Hold rating.

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