On Jul 12, 2016, Zacks Investment Research downgraded Jabil Circuit Inc (NYSE:JBL) to a Zacks Rank #5 (Strong Sell). Going by the Zacks model, companies holding a Zacks Rank #5 are likely to underperform the broader market over the next one to three months.
Year-to-date, Jabil’s shares have lost nearly 19% in contrast to a gain of over 4.5% in the S&P 500 index. Stagnating sales and a leveraged balance sheet are the primary headwinds for the company. Apart from this, there have been speculations that its largest customer Apple (NASDAQ:AAPL) is still facing demand woes and may even lose market share to its competitor Samsung (OTC:SSNLF) . Samsung last week provided an upbeat guidance for the forthcoming quarter.
Jabil, which is one of the largest global suppliers of electronic manufacturing services, derives over 20% of its total revenue from Apple while over 30% of the company’s operating income is attributable to the iPhone maker. Lately, a number of analysts have also lowered their outlook for Apple. In the wake of dwindling profits at Apple, suppliers like Jabil may be subjected to pricing pressure, thus raising further concerns.
To top it all, over the last 30 days, earnings estimates for Jabil have been on a downtrend. The Zacks Consensus Estimate declined 13.7% for fiscal 2016 and 15.6% for fiscal 2017, raising more concerns about growth.
A better-ranked stock that can be considered is MeetMe, Inc. (NASDAQ:MEET) carrying a Zacks Rank #2 (Buy).
APPLE INC (AAPL): Free Stock Analysis Report
JABIL CIRCUIT (JBL): Free Stock Analysis Report
MEETME INC (MEET): Free Stock Analysis Report
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Zacks Investment Research