Here's Why You Should Avoid Investing in Zebra Technologies Now

Core Viewpoint - Zebra Technologies Corporation (ZBRA) has underperformed in operational performance, primarily due to rising costs of sales and high debt levels [1][5][6]. Company Overview - Zebra Technologies, based in Lincolnshire, IL, is a leading provider of enterprise asset intelligence solutions in the automatic identification and data capture solutions industry globally. The company offers a diversified portfolio that includes cloud-based subscriptions and a full range of services such as maintenance, repair, technical support, and managed and professional services [2]. Financial Performance - ZBRA currently holds a Zacks Rank of 5 (Strong Sell). Over the past three months, the stock has declined by 23.5%, aligning with industry trends [3]. Cost Challenges - The company has faced significant cost increases, with the cost of sales rising by 22.3% year-over-year in Q4 2024 due to high raw material costs. Additionally, selling and administrative expenses increased by 11% year-over-year, which may adversely affect profitability if these trends continue [5]. Debt Levels - Zebra Technologies has experienced a compound annual growth rate (CAGR) of 18.9% in long-term debt over the past five years, reaching a total of $2.09 billion by the end of Q4 2024. The company's cash and cash equivalents stand at $901 million, which is not sufficient given the high interest expenses of $98 million in Q4 [6]. Recent Financing Activities - In Q2 2024, the company completed a $500 million offering of senior notes due June 1, 2032, with a fixed interest rate of 6.5%, payable semi-annually. While this offering will help reduce a portion of its term loan, it will also increase the overall debt balance [7]. Geopolitical Risks - ZBRA operates in various regions, including North America, EMEA, Asia-Pacific, and Latin America, making it susceptible to political, environmental, and geopolitical issues. Ongoing conflicts, such as those between Russia & Ukraine and Israel & Iran, may negatively impact business operations. Additionally, a stronger U.S. dollar could adversely affect overseas business performance [8].