Among leading growth stocks, our pick for today’s IBD 50 Stocks To Watch column is Zebra Technologies (ZBRA). Zebra is among top stocks that are currently building a new base and nearing a proper buy point.
The Illinois-based firm makes printers that are used to produce tickets, labels, receipts and plastic cards. The company maintains a strong IBD Composite Rating of 92.
Morgan Stanley raised its price target on the stock earlier this month to $415 from $410. Morgan Stanley analysts said that Zebra’s demand trend continues to drive growth, noting the company’s recent $570 million deal with USPS. Another factor helping Zebra’s current growth is the ongoing recovery in small- to medium-size businesses as Zebra’s smaller customers continue to invest more in its efficient technology.
However, Morgan Stanley also reiterated the stock’s current underweight rating, which means they expect the stock to underperform compared to the market.
Zebra: Accelerating EPS, Sales Growth
The growth stock’s earnings and sales growth rates have recently accelerated. Zebra Technologies posted year-over-year EPS growth of 25% and 79% in the most recent quarters. Meanwhile, year-over-year sales growth went from a flat change to 10% to 28% over the past two quarters.
Analysts expect the company to show an earnings increase of 71% year over year for the June-ending quarter, with EPS of $4.12 on sales of $1.3 billion, according to IBD data. That would represent a revenue increase of 41%.
“We achieved record quarterly sales and earnings which exceeded our expectations, despite industry supply chain challenges,” said Anders Gustafsson, CEO of Zebra Technologies. “We enter Q2 with a strong order backlog as we see global business demand recover and customers prioritizing spending on our solutions. This momentum enables us to raise our full year 2021 outlook for both sales and profitability.”
Growth Stocks Building Bases
Shares of this IBD 50 growth stock have had a strong 2021 so far, rising over 30%. The growth stock is currently forming a base with a 518.76 buy point. Shares remain roughly 3% away from this proper entry.
Zebra has been trading above the 50-day moving average in recent days after dipping below this key area of support for a few weeks.
Zebra’s relative strength line has been trending mostly sideways over the past few weeks but still remains near recent highs. Ideally, the RS line — which compares a stock’s performance with that of the S&P 500 — will be at or near new highs as the stock breaks out.
On the positive side, Zebra saw its mutual fund ownership at the end of the March quarter reach 1,684 funds. According to IBD data, the growth stock’s mutual fund ownership has increased consistently over the past 15 quarters.
Finally, Zebra’s Relative Strength Rating of 84 meets the minimum requirement (80) we like to see for growth stocks breaking out.
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