What happened

Shares of data capture and processing company Zebra Technologies (NASDAQ:ZBRA) slumped 18.8% in May, according to data provided by S&P Global Market Intelligence.

The move can be put down to a combination of factors. First, investors took a dim view of the company's first-quarter earnings report -- released at the end of April -- and the stock continued its post-earnings sell-off. 

Second, up until the end of March, Zebra had been one of the best-performing industrial stocks on the market, and it's understandable if investors may have wanted to lock in some profits.

A man wearing a yellow hard hat while using a barcode reader and scanning packages in a warehouse.

Image source: Getty Images.

Third, the escalation in the trade conflict inevitably led to concerns over companies with significant exposure to transportation and logistics. Moreover, Zebra imports a substantial number of products from China and an increase in tariffs on those products will surely add to its costs.

So what

That said, it's important to put some perspective on matters. The first-quarter earnings were actually pretty positive, with management raising its full-year net sales growth forecast to a range of 5%-8% from a previous estimate of 4%-7%. In addition, full-year free cash flow (FCF) is forecast to be $625 million, putting the stock on a forward price to FCF multiple of 14.5 times FCF -- a good value for a stock with such attractive long-term end markets.

In a nutshell, Zebra's barcode scanners, printing solutions, and identification and tracking products help retailers, e-commerce operations, manufacturers, and transportation/logistics companies fully capitalize on utilizing the Internet of Things, cloud computing, and mobility technologies.  

The tariff issue is obviously a concern, and while management plans to mitigate the impact by making pricing adjustments, looking for alternative product sources, and taking supply chain actions, it's unclear how the dust will settle on the matter.

Now what

Investors are going to have to wait until the second-quarter earnings report in order to get some more definitive information on what the impact of the latest round of tariffs will be on Zebra's cost structure. As ever in these situations, the market is likely to sell off the stock until the financial impact becomes clearer.

However, investors shouldn't lose sight of the fact that Zebra's end-market demand remains favorable and management continues to believe the company is on a long-term mid-single-digit sales growth path. In this context, the recent sell-off could be creating a decent buying opportunity.