Jabil lost $360 million on September 25
Jabil stock (JBL) fell 7.3% on September 25 and closed trading at $27.90 per share. Jabil lost ~$360 million in market value on the day. The stock is currently trading 18.0% above its 52-week low of $23.70 and 12.0% below its 52-week high of $31.77. The stock decline has wiped out some of Jabil’s gains this year. The stock is up 7.2% in 2018.
No room for margin expansion
Jabil’s CEO, Mark Mondello, has announced that it will be difficult for the company to improve margins between fiscal 2019 and 2021. Mondello stated, “We assume that from fiscal 2019 to fiscal 2021, we’ll get no expansion, no leverage of margin.” Jabil aims to increase spending to achieve revenue growth, which will likely pressure profit margins.
The company has also been impacted by the trade war between China (FXI) and the United States. Similar to other manufacturers, Jabil produces components in China and sells them in domestic markets. Last year, revenue from China accounted for 21% of total revenue. Analysts expect Jabil’s revenue to rise 14% to $21.76 billion in fiscal 2018 and 4.2% to $22.63 billion in 2019.
Of the 13 analysts covering Jabil, five recommend a “buy,” six recommend a “hold,” and two recommend a “sell.” The average 12-month price target estimate is $32.56, indicating that the stock is trading at a 17.0% discount to its average estimates.