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Why Zebra Technologies Stock Tanked 10% Today

By Rich Smith - Jul 18, 2019 at 3:25PM

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Wall Street continues to chip away at Zebra's growth story.

What happened

Second verse, same as the first.

One week ago today, shares of automatic identification and data capture (AIDC) specialist Zebra Technologies ( ZBRA 2.79% ) dropped 7% in response to an analyst report suggesting that sales were coming in slower than expected in Q2.

One week later, a different analyst, Wellington Shields, is cutting its estimates for Zebra as well, and downgrading the stock to a hold. Shares sold off by more than 10% in response earlier today, and while they have recouped some of those losses, they were still down 7.3% as of 2:55 p.m. EDT.

Zebra standing in front of a large bar code

Image source: Getty Images.

So what

So exactly how bad does Wellington Shields expect Zebra to do in Q2, since it is convinced a downgrade is necessary? Neither nor, two sources for analyst commentary, had any specific information about why Wellington is worried, only reciting the fact that the downgrade happened. Yet investors are selling the stock anyway.

Now what

Selling a stock without demanding specifics beforehand is not a logical response. Then again, with Zebra stock costing a rich 23 times earnings, and pegged for only 10% long-term earnings growth on Yahoo! Finance, perhaps investors aren't really inclined to give Zebra the benefit of the doubt. With the stock still up 33% over the past year, they may be thinking now is a time to take some chips off the table and reevaluate after earnings.

In which case, they won't have long to wait: Zebra reports Q2 results on July 30.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Zebra Technologies Corporation Stock Quote
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