Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Zebra Technologies Stock Soared in 2020

By Lee Samaha - Jan 1, 2021 at 9:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The data capture company proved the doubters wrong and is well set for another good year in 2021.

What happened

Shares in data capture company Zebra Technologies ( ZBRA -1.45% ) rose 50% in 2020, according to data provided by S&P Global Market Intelligence. But it wasn't all smooth sailing for the stock, with a significant decline in early March followed by a 100%-plus gain after that.

Logistics workers using scanners.

Image source: Getty Images.

For readers who don't know the company well, Zebra manufactures bar code scanners, RFID readers, mobile computers, and printers that capture real-time data. As data becomes an ever larger part of industry, it's essential to capture more and more of it through devices made by Zebra and a competitor like industrial conglomerate Honeywell International ( HON -0.24% ).

There were three main drivers for Zebra's share price appreciation in 2020:

  • According to management, Zebra has "substantially completed its initiative" to shift sourcing from China, allaying fears that trade tariffs would lead to escalating costs for the company. 
  • Its impressive recovery from the pandemic has soothed concerns over its exposure to clothing retailers and small businesses.
  • The sales recovery has been a lot stronger than management's guidance, and it's been backed up by a positive outlook from Honeywell, too.

Expanding on the sales recovery, management had forecast a 3% to 7% decline in the third quarter only to report a 0.2% increase. Moreover, it expects sales to increase by 3% to 7% in the fourth quarter.

So what

The acceleration in investment in digital technologies and automation caused by the pandemic is playing to Zebra's strengths. For example, if the surge in e-commerce demand means more investment in logistics, that means more demand for data capture products. As such, Zebra is probably a net beneficiary of the pandemic.

Now what

In the near term, investors should look for the fourth-quarter sales numbers because they may well come in ahead of guidance. Thinking longer term, the glass-half-empty view sees an artificial pull-forward in Zebra's sales in 2020, which will then correct itself in 2021.

On the other hand, the glass-half-full view sees the increased investment in digitization and automation as a structural change that will encourage wider adoption (and ultimately more sales) for Zebra. Given the strong secular trend in investing in automation, investors have every reason to believe the glass-half-full view will win out in 2021.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zebra Technologies Corporation Stock Quote
Zebra Technologies Corporation
$588.29 (-1.45%) $-8.67
Honeywell International Inc. Stock Quote
Honeywell International Inc.
$203.50 (-0.24%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.