Investors see considerable opportunity ahead for Zebra Technologies (ZBRA -0.67%). In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on Feb. 16, Motley Fool contributors Brian Withers and Toby Bordelon discuss why investors should be excited for Zebra's future and its $30 billion addressable market.
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Brian Withers: Let's move onto Zebra, ZBRA. I'm not going to redo the quarterly highlights. There are some short-term headwinds with supply chain cost and issues, but I think that the company is super set up for the long term. There is a slide that it showed in the most recent earnings results, which talks about the market that it's in and the opportunities ahead. I want to share that one slide because I think it's really positive for investors. There's a lot going on here. The core business on the bottom left there, the lightest blue is enterprise mobile computing, data capture, thermal printing, etc., $10 billion to $12 billion market cap. This is the core market that the company is in today. The Zebra printers, the things that read them, the units that help you manage your inventory throughout your retail establishment or hospital or manufacturing business, that's growing long term. That's growing at a long-term growth rate of about 4% to 5%. In the adjacent one, the one in the middle, they talk about smart supplies, RFID tablets. These are existing products that it has on the market. It talked about having single-digit as a percentage of revenue. These adjacencies only make up a small portion of the revenue. That market is even bigger than the core market, and it's growing in the high single-digits. It's smaller and it's growing faster. The last piece, the expansion here, talks about machine vision, smart cameras, mobile robots, retail, and demand planning software. It's a bit smaller, $6 billion market cap, but that's growing at $6 billion and it's also in this market as well. This share of revenue is really not even measurable today. It's less than 1% of the company's total revenue. If you look at the megatrends there in the upper right-hand corner, cloud computing, intelligent automation, I'd also add labor shortages as really one of the things that's going to propel Zebra going forward in the future, making its customers and employees much more capable and being able to do more with less. Really excited about the future of Zebra in its $30 billion addressable market that it's got.
Toby Bordelon: There are certainly a lot of opportunities there. You've got RFID. You've got machine vision. You've got smart cameras. You've got all kinds of stuff. Many of those are arguably disruptors to that core initial barcode business they made their reputation on, classic innovator's dilemma almost. Do you get a sense that management is willing to pursue these opportunities, even if that might mean that the business they're famous for ultimately doesn't make sense anymore?
Withers: Yeah, that's something that absolutely investors should be watching for. I think they're super serious about it. Let me share a couple of slides as to why I think so. They got AI, robots, machine vision, computer vision, prescriptive analysis, and temperature monitoring. There's a lot that's going on there. They are putting their money where their mouth is. They're buying this stuff. You asked about specifically RFID. They have a family of RFID products already. You can see their printers. As the labels are printed, the RFID tags are embedded. You can see the labels and supplies, they're embedded in the labels. They also have scanners, antennas, whatnot, and a full suite of RFID products. You talked about machine vision. This thing is really cool. You can see the robot or whatever it is in the middle of the store aisle there. It's got a bunch of cameras facing off to the right-hand side and it's scanning the shelf, and what's it doing? It's looking for things that are misplaced, things that are mispriced, potentially stock that is messed up or out-of-stock. What it does is it runs through the aisles in the retail arena and provides a set of tasks for employees to go in and fix and address. When they fix them, they can click that they're done. Rather than having employees do the mundane job of walking through every aisle and addressing things as they come, this is taking that dull and boring activity and making it much more effective for their employees.