UPDATE: Goldman Sachs Resumes Coverage on Jabil Circuit on Weaker Growth, Reasonable Valuation
In a report published Wednesday, Goldman Sachs analyst Mark Delaney resumed coverage on Jabil Circuit (NYSE: JBL) with a Neutral rating and $22.00 price target.
In the report, Goldman Sachs noted, “We expect Jabil's fundamentals to be pressured over the next few quarters as it substantially ends its business with Blackberry (12% of revenue in FY12). In addition, we are concerned that Jabil has lost share even excluding Blackberry, as (1) Jabil's revenue outside of Apple has declined in each of the last two years (Exhibit 89) and (2) Jabil's Healthcare segment revenue has declined yoy for five straight quarters while Plexus' Healthcare revenue has grown yoy for five straight quarters. These risks are mitigated in our view by the fact that: (1) Jabil guided FY14 EPS assuming minimal Blackberry revenue, which we believe will help to appropriately set investor expectations for this business; (2) Handset assembly business, which we believe was the majority of Jabil's Blackberry business, is a low margin business. If Jabil is able to restructure/fill its unutilized equipment, structural margins could be higher. (3) Jabil's revenue in the November quarter will likely benefit as Apple (19% of revenue in FY13) ramps the new iPhone. (4) Jabil is the worst performing EMS stock YTD, up 14% vs. the group average up 43%.”
Jabil Circuit closed on Tuesday at $21.90.
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