Jabil Stock Implodes: Market Manufactures Entry for New Money

Core Insights - Jabil Inc. experienced a weak quarter following the sale of its mobility business, with a 16.7% decline in revenue, but margins and cash flow remain solid, allowing for substantial capital returns through share repurchases [1][4][2] - The company's cash position improved significantly, with cash up 42% year-over-year, and it is in a leaner operational state than in previous years [3][2] - Analysts have reset their expectations due to guidance for Q3 and FY being below consensus, leading to a 10% drop in stock price, although the long-term outlook remains positive with growth expected to return in FY2025 [5][1] Financial Performance - Jabil's gross margin expanded by 120 basis points, helping to offset higher costs and restructuring expenses, resulting in adjusted earnings down 10.5% year-over-year, which met consensus despite revenue weakness [4][5] - The company’s capital returns are primarily through share repurchases, which reduced the Q2 comparison by nearly 7% and are expected to continue into 2024 [2][1] Market Sentiment - Despite the recent decline, Jabil's stock is rated as a firm "buy," with a nearly 100% increase in price target over the last year, and institutional ownership stands at about 93% [6][1] - Insider selling has spiked but is considered opportunistic, with insiders still holding approximately 2.6% of shares [6][1] Technical Outlook - The technical outlook for Jabil stock is mixed, with near-term bearish activity but a long-term trend intact; support above the 150-day moving average is crucial for potential price recovery [7][1] - If the support level holds, shares could gain 15% to 20% to align with analysts' consensus targets [7][1]