TipRanks Smart Value #36: Hidden Stripes
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Dear Investors,
Dear Investors,
Welcome to the 36th edition of our recently launched TipRanks Smart Value Newsletter!
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This Week’s Top Value Pick: Zebra Technologies (ZBRA)
Zebra Technologies (ZBRA) is a U.S.-based leader in the Automatic Identification and Data Capture (AIDC) industry, providing advanced solutions that connect people, assets, and data in real time. The company designs and manufactures enterprise-grade products, including barcode and RFID scanners, mobile computers, printers, and data capture devices that help organizations enhance operational visibility and efficiency. Serving a wide range of industries – including retail, healthcare, logistics, and manufacturing – Zebra’s technologies enable intelligent asset tracking and workflow optimization on a global scale, reinforcing its position as a pioneer in automation and data-driven enterprise solutions.
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Barcode Beginnings
Zebra Technologies traces its origins to 1969, when it was founded as Data Specialties, a manufacturer of high-speed electromechanical products. The company shifted its focus in the early 1980s to barcode and labeling solutions, laying the foundation for its leadership in AIDC technologies. In 1986, it adopted the name Zebra Technologies, symbolizing its identity in barcode printing and tracking solutions. Throughout the 1990s and early 2000s, Zebra expanded globally, diversifying its portfolio across printing, tracking, and data management technologies, and building a solid reputation for reliability and innovation in enterprise operations.
Zebra has accelerated its transformation through a series of strategic acquisitions that shifted its business from hardware-centric products to a broader suite of enterprise software, machine vision, and automation solutions. A defining milestone came in 2014 with the acquisition of Motorola Solutions’ Enterprise Division, which gave Zebra a major foothold in mobile computing, advanced data capture, and communications technologies. The deal also added well-known product lines such as Symbol Technologies and Psion, significantly expanding Zebra’s customer base and global reach.
The company continued building on this momentum with targeted acquisitions designed to strengthen its technology stack and industry presence. In 2018, it acquired Xplore Technologies, adding durable tablets built for demanding industrial use, followed by Temptime and Profitect in 2019, enhancing its healthcare and retail analytics capabilities. In 2020, the acquisition of Reflexis Systems brought leading workforce scheduling and task management software to Zebra’s portfolio, bolstering its presence in retail and hospitality.
Zebra’s push into industrial automation accelerated with the 2021 acquisitions of Adaptive Vision, Fetch Robotics, and Antuit.ai, expanding its expertise in machine vision, robotics, and AI-based demand forecasting. The 2022 addition of Matrox Imaging further strengthened its machine vision portfolio and extended its reach in automated inspection and quality control systems.
The company has continued to build on this momentum with two key acquisitions earlier this year, Photoneo and Elo Touch Solutions. The pending Photoneo acquisition, expected to close by the end of the year, will bring advanced 3D vision sensor technology that expands Zebra’s automation toolkit and strengthens its leadership in intelligent robotics and industrial vision. The $1.3 billion acquisition of Elo Touch Solutions marks another strategic milestone, adding a complementary suite of touchscreen and interactive display technologies. Elo enhances the company’s position in the connected frontline space with new capabilities in point-of-sale systems, self-service kiosks, and retail automation. The deal is projected to contribute about $100 million in revenue in the fourth quarter of 2025 and contribute over $400 million in sales in 2026. The acquisition is expected to generate meaningful cost synergies and cross-selling opportunities across retail, hospitality, and healthcare markets.
These strategic moves have transformed Zebra into a comprehensive enterprise platform that integrates hardware, software, and intelligent automation. By combining data capture, robotics, and AI-driven analytics, the company has positioned itself as a global leader in enterprise asset intelligence – enabling real-time visibility, automation, and efficiency across manufacturing, logistics, healthcare, and retail sectors.
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Visible Advantage
Zebra Technologies derives roughly 82% of its revenue from product sales, encompassing both hardware devices and embedded software that connect frontline operations to cloud-based analytics platforms. Complementing its hardware business, the company generates 18% of its revenue through recurring income from software licenses, cloud-based solutions, maintenance contracts, and subscription services. This blend of one-time equipment sales and ongoing service revenue provides balanced cash flow and underpins long-term financial stability.
Zebra operates through two complementary segments: Asset Intelligence & Tracking (AIT) and Enterprise Visibility & Mobility (EVM). AIT is a global leader in barcode printing and asset tracking technologies, offering printers, RFID systems, and real-time location solutions, along with related supplies and services. EVM focuses on automatic identification and data capture technologies, including mobile computing, fixed industrial scanners, machine vision, and workflow optimization tools. Together, these segments deliver comprehensive visibility and automation solutions to global enterprises.
Starting in Q4 2025, Zebra will transition to two new reporting segments – Connected Frontline and Asset Visibility & Automation – to better align its structure with long-term growth priorities. The Connected Frontline business, with a total addressable market (TAM) of over $20 billion, focuses on technologies that enhance frontline productivity, including mobile computing, rugged tablets, AI-driven software, and touchscreen solutions from Elo. The Asset Visibility & Automation segment will target a $35 billion market opportunity centered on digitizing and automating supply chains through data capture, printing, machine vision, and RFID systems. Combined, these businesses are positioned for 5–7% organic growth, supported by secular tailwinds in AI, mobile computing, and digital transformation.
Zebra’s deeply integrated solutions create barriers to competition through high switching costs and long-term customer relationships across mission-critical operations. Its expanding ecosystem of software and services continues to enhance customer retention and recurring revenue potential. By combining innovation in automation with disciplined capital allocation, Zebra is well-positioned to sustain earnings. The company’s ongoing shift toward intelligent software, AI-driven platforms, and automation technologies continues to strengthen profitability and reinforce its leadership in enterprise intelligence.
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Intelligent Motion
Zebra’s growth strategy is built around expanding the use of RFID technology, increasing investments in retail and e-commerce automation, and integrating AI tools to enhance productivity for frontline workers. RFID has been one of Zebra’s most reliable growth drivers, consistently delivering double-digit gains in recent years across industries such as retail, logistics, manufacturing, and government. The company’s broad portfolio of RFID readers, printers, labels, and mobile devices enables businesses to achieve greater supply chain visibility, inventory accuracy, and operational efficiency – capabilities that have become essential in today’s data-driven economy.
Beyond its strength in RFID, the company is advancing its transition toward intelligent automation and analytics through software-driven platforms that enhance operational visibility and decision-making. This transition is important because it moves the company into higher-margin, recurring-revenue areas driven by software and AI, reducing its reliance on hardware sales. The company’s automation and analytics solutions span workforce management through Reflexis Systems, AI-based demand forecasting from Antuit.ai, and machine vision technologies from Matrox Imaging, which use advanced imaging and software to automate complex industrial and supply chain processes.
Building on this foundation, Zebra is also advancing into intelligent automation through AI-powered solutions such as the Zebra Companion AI agent and its on-device AI suite. These innovations enable handheld and wearable devices to “see, hear, and understand” their surroundings. Early pilots include a specialty retailer using AI for product recommendations and onboarding, and a transportation firm leveraging AI for proof-of-delivery and compliance. The company expects initial revenue contributions from these programs in 2026, with a more meaningful ramp-up beginning in 2027.
Demand across Zebra’s end markets remains solid but uneven amid macroeconomic uncertainty; its diversified customer base and growing software portfolio help cushion earnings through business cycles. Retail and e-commerce continue to lead growth, driven by peak-season activity and broader RFID adoption, while transportation and logistics showed steady results despite softer parcel volumes. Healthcare faced tough comparisons against last year’s strong performance, and manufacturing remained subdued, particularly in machine vision systems tied to the semiconductor and EV markets.
To mitigate external risks, Zebra has reduced U.S. import dependency on China to below 20% , targeting the mid-teens range over time. While tariffs continue to pressure margins in certain hardware categories – especially printing and RFID – management has implemented measures to substantially offset these impacts by early 2026.
The company is optimizing its supply chain, diversifying manufacturing to lower-tariff regions, and implementing pricing and sourcing strategies to preserve profitability. These initiatives are expected to gain momentum through 2025 and deliver full benefits by 2026. By addressing tariff headwinds proactively, Zebra aims to maintain its margin structure and strengthen long-term earnings power. Management’s disciplined execution, focus on operational efficiency, and commitment to automation and AI-driven solutions position Zebra for durable, profitable growth despite short-term challenges.
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Steady Strides
Zebra Technologies has maintained consistent financial performance over the past several years, driven by disciplined execution, a diversified business model, and rising demand for automation and visibility solutions. Over the last five years, the company’s revenue and adjusted EPS have grown at a CAGR of approximately 3.9% and 2.5%, respectively. This steady expansion reflects moderate but sustained sales growth, margin improvement initiatives, strategic acquisitions, and strong execution across its core segments.
In the third quarter of fiscal 2025, the company reported net sales of $1.32 billion, a 5.2% year-over-year increase, with organic growth of 4.8%, surpassing Street expectations. The AIT segment led the performance, delivering 10.6% year-over-year growth to $455 million, supported by strong demand for tracking and identification technologies. The EVM segment grew 2% to $865 million, reflecting stable demand in mobile computing and data capture solutions. Gross profit rose 3.4% to $634 million, representing a 48% margin, slightly lower than the prior year due to a $6 million tariff impact. Adjusted EBITDA increased 6.3% to $285 million, or 21.6% of adjusted net sales, while adjusted EPS rose 11% year-over-year to $3.88, exceeding analyst estimates.
Zebra’s balance sheet remains healthy, providing ample liquidity and flexibility to fund growth initiatives. The company ended the third quarter with $1.05 billion in cash and $2.18 billion in total debt, resulting in a net debt-to-adjusted EBITDA ratio of just 1x, well below the industry median of 1.7x. The company holds a “BB” long-term credit rating from S&P with a stable outlook, reflecting its strong financial profile. During the first nine months of 2025, Zebra generated $560 million in operating cash flow and $504 million in free cash flow, taking into account $56 million in capital expenditures. Management expects full-year free cash flow to exceed $800 million, supported by capital spending of $70 million to $80 million, positioning the company to reinvest in growth, strengthen its balance sheet, and return value to shareholders over time.
Looking ahead, Zebra expects fourth-quarter sales to grow around 8% (6% organically), supported by the Elo Touch and Photoneo acquisitions, along with modest pricing benefits. The company projects an adjusted EBITDA margin of about 22% and adjusted EPS of roughly $4.30 at the midpoint, in line with consensus estimates. Gross profit is expected to be reduced by another $6 million due to ongoing import tariff effects. For FY25, the company anticipates sales growth of about 8%, an adjusted EBITDA margin near 21.5%, and adjusted EPS of $15.80, representing a 17% increase from 2024.
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Undervalued Strength
Zebra Technologies has chosen to prioritize reinvestment into growth, strategic acquisitions, and share repurchases over dividend payments, reflecting its long-term focus on growth, innovation, and shareholder value creation.
In 2025, Zebra demonstrated its strong commitment to shareholder returns through an active repurchase program funded by robust cash flow and a healthy balance sheet. The company repurchased $284 million worth of shares through the end of the third quarter and authorized an additional $500 million in buybacks to be executed over the next 12 months.
Shares of ZBRA have declined by around 32% over the past year, creating a potential value opportunity as the market’s concerns about near-term profitability and efficiency have overshadowed the company’s solid revenue growth and strong long-term fundamentals.
From a valuation perspective, Zebra Technologies’ stock appears attractively priced relative to both its historical levels and industry peers. The company currently trades at more than a 30% discount to its historical averages across key valuation measures, including trailing and forward price-to-earnings (P/E) ratios and EV/EBITDA multiples. It also trades at more than a 40% discount on a forward price-to-book and trailing price-to-cash-flow basis. When compared with peers such as Trimble and Cognex Corp., Zebra remains at the lower end of the valuation spectrum, based on non-GAAP trailing and forward P/E, forward EV/EBITDA, and trailing price-to-cash-flow metrics. For investors, these depressed valuation levels suggest that much of the near-term macro and demand-related uncertainty may already be priced into the stock, offering potential upside if the company executes well on its growth and margin recovery plans.
Analysts remain optimistic about Zebra, as the Elo acquisition is likely to support modest margin expansion as cost synergies materialize. With key warehouse, logistics, and retail automation markets showing early signs of recovery, Zebra Technologies is well-positioned to benefit from renewed demand and generate stronger earnings as it executes on its strategic growth initiatives.
Wall Street consensus estimates imply a potential upside of about 36% from current levels, with some forecasts projecting gains of more than 59%. A discounted cash flow (DCF) analysis also indicates that the stock could be trading roughly 26% below its estimated intrinsic value, suggesting meaningful long-term upside for investors.
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Investing Takeaway
For value investors, Zebra Technologies presents an appealing opportunity as market pessimism has pushed its valuation well below historical norms and peer averages. Much of the concern over near-term margin pressure and uneven demand appears already reflected in the share price, offering potential upside if conditions stabilize. Zebra’s solid fundamentals, steady revenue growth, disciplined capital allocation, and commitment to share repurchases underscore its long-term value creation potential. With a diversified business model, expanding software-driven revenue base, and exposure to secular trends in automation and AI, Zebra offers investors an opportunity to own a quality franchise with attractive revaluation potential assuming earnings momentum and margin expansion resume.
