BofA Securities reiterated its buy rating on Jabil, noting that the company deserves to trade at a higher multiple.
Jabil shares are up 57% yat-to-date, yet analysts see at least 20 percent additional upside potential.
The analysts consider Street Estimates conservative and anticipate positive revisions.
Jabil's peers also feel Jabil deserves a higher multiple because of the expected double digit EPS growth, a secular growth driver of electric vehicles, cloud, renewable energy, energy storage, digital health, and automation/AI, and portfolio mix shift to longer lifecycle and higher margin verticals.
Also, due to industry leading Return on Invested Capital ( ROIC ), the sale of mobility business reduces earnings volatility and strong Free Cash Flow, or FCF, and strong capital returns, according to the analysts.
The firm said that Electronics Manufacturing Services (EMS) companies have typically traded at low multiples because they cater to high velocity, shorter lifecycle, low margin markets. Given Jabil mix shift, growth, and high ROIC, the analysts believe it merits a multiple more in-line with industrial manufacturing companies which, on average, trade in the mid-teens.
Thus, the analysts reaffirmed their Buy rating on JBL on a large scale and competitive strength in electric vehicle, or EVs, healthcare, renewables and Cloud.
The firm sees investment positives, such as tailwind from secular growth in automotive, healthcare, industrial recovery in semiconductor capital equipment, and growing Cloud business, which outweighs risks from continuing uncertainty macro, component shortages and supply-chain challenges and unfavorable mix which can offset margin improvement.
BofA's stock is expected to be valued at $130, with a price target of $130.
Jabil has a Buy rating at Seeking Alpha's Quant Rating System, which consistently surpasses the market. The average rating of theSeeking Alpha authors is also Buy, and the average Wall Street analysts' rating also concurs with a Buy.