Is Jabil Stock Underperforming the S&P 500?

Jabil continues to face headwinds, but its fiscal Q1 2025 report proves that the bottom is in for this business, and the outlook is bright. The report includes a top-line contraction but outperformance on the top and bottom lines compounded by improving guidance to an above-consensus level.

The takeaway is that the contraction is slowing, and the business will return to growth soon, by the end of calendar 2025. 2024’s optimistic analysts' trends will likely strengthen in 2025 as the quarters progress because the forecasts were light. Strength was driven by critical segments, including cloud, data center infrastructure, and digital commerce, which go hand in hand with AI and digitization globally.

Jabil Has Strong Quarter, Raises Guidance, Shares Surge

Jabil had a solid quarter in FQ1 despite the year-over-year (YoY) revenue contraction. The company’s net revenue of $6.99 billion is down compared to the prior year, but the 16.7% contraction is lighter than the previous quarter and outpaced consensus by a significant margin. Analysts had forecasted another 500 basis points of decline and weaker guidance. Margin news is also favorable, with margin contracting on deleveraging but less than expected. The net result is $2.00 in adjusted EPS, exceeding targets by $0.012, or approximately 500 basis points.

The market catalyst in the results is guidance. The company initiated Q2 guidance strongly, setting its revenue and earnings targets above market expectations and raising the full-year targets. The company now expects adjusted EPS to run near $8.75 and may be cautious in the estimate. Data center and cloud growth reached new heights in 2024. It is expected to sustain or accelerate in 2025 as hyperscalers, including Apple , Alphabet , and Amazon , race to meet industry demand while advancing their technologies.

Cash flow is a critical detail for investors. The company’s cash flow was impaired due to the revenue contraction but remains sufficient to sustain share buybacks and a healthy balance sheet. Balance sheet highlights are a bit sketchy, with cash down and equity falling, but a mitigating factor exists. That is the impact of share repurchases, which includes a 5.7% quarterly increase in treasury stock and a 13% YoY reduction in share count. While bad on paper, this is good for investors and supportive of share prices over time. Nothing changed at Jabil, except cash was converted into a lower share count. Other balance sheet highlights include steady debt levels and low leverage with long-term debt at 2x equity.

Analysts Trends Are Positive; Institutions Buy Jabil in 2024

Jabil’s analyst activity in 2024 is light but positive otherwise. MarketBeat tracks seven analysts with ratings; two pegged at Hold and five at Buy for a Moderate Buy consensus. The consensus price target assumes the stock is fairly valued at nearly $145, but the revision trend points to a new all-time high. The first revision to appear on the tracker following the report is an increased price target from Goldman Sachs to $145, matching the consensus, but recently set targets put this market near $160, which would be a new high.

Institutional trends also support this market in 2024. The institutions own more than 90% of the stock and have bought on balance every quarter, providing a strong tailwind for the market. Their support will unlikely waver in 2025 because of the cash flow, buyback outlook, and valuation, which is very low. This company trades at only 15x its earnings.

The Technical Outlook: Jabil Approaches Critical Levels

Jabil's stock price surged following the Q1 release and will likely head higher in 2025, extending the 2024 rebound. However, the market shows resistance below the 2024 highs that may cap gains over the next few weeks or months. If the market cannot move higher, it could sell off to close the gap formed after the release, allowing the market to realign with the price action. The critical resistance targets are near $150 and $157.