Shares of contract electronics manufacturer Jabil (NYSE:JBL) have been in good form in recent months thanks to solid quarterly results, and the good news is that after the latest report, the company appears to be starting the new year with momentum on its side.
Jabil announced its first quarter fiscal 2025 results (for the three months ended November 30) on December 18. Shares rose as the company’s numbers came in well above Wall Street expectations. In fact, Jabil raised its full-year expectations, pointing out that the proliferation of artificial intelligence (AI) will give its business a nice boost.
Let’s take a closer look at Jabil’s latest quarterly results and determine whether this stock could maintain its impressive momentum into 2025 and beyond.
Jabil’s first-year revenue came in at $7 billion, exceeding company expectations of $6.3 billion to $6.9 billion. It reported non-GAAP earnings of $2 per share, well above the midpoint of guidance of $1.85 per share. It’s worth noting that Jabil’s revenue fell 17% from the same period last year, while adjusted profits fell 23%. This decrease was due to Jabil’s divestiture of its mobility business, which was completed in December 2023.
Excluding the impact of that divestiture, Jabil’s revenue was 1% higher than the same period last year. In addition, Jabil’s performance during the quarter was impacted by Hurricanes Helene and Milton, which forced the company to close its facilities for a few weeks and impacted revenue. Management points out that Jabil’s margins were impacted by 10 to 20 basis points by the hurricanes, but still managed to beat earnings expectations.
In fact, Jabil has raised its fiscal 2025 revenue guidance to $27.3 billion from its previous expectation of $27.3 billion. It now expects to end the year with adjusted earnings of $8.75 per share, compared to its previous guidance of $8.65 per share. It will come as no surprise that Jabil is improving its outlook as the year progresses, thanks to tailwinds in the semiconductor capital equipment, networking, and cloud and data center infrastructure markets.
Jabil management says that “the rise of AI is driving demand for semiconductor manufacturing and test equipment, and we expect this to continue throughout FY25 and beyond.” In addition, the company’s largest hyperscale customer has strengthened its existing relationship with the company to integrate custom AI chips into server racks, and also secured a new hyperscale customer for its silicon photonics solutions.
The company is confident that growing demand for liquid-cooled AI servers will provide a tailwind in the long term, which is not surprising considering that this market will grow rapidly in the future. After all, liquid cooling in data centers is forecast to grow 24% annually through 2033, generating nearly $40 billion in revenue by the end of the forecast period. Furthermore, demand for silicon photonics is expected to increase at a compound annual growth rate of 42% through 2029.
These AI-related growth opportunities should allow Jabil to return to growth starting next fiscal year, and a look at consensus revenue forecasts for the next few years suggests as much.
The improvement in sales is also expected to extend to the bottom line, with analysts expecting Jabil to deliver double-digit profit growth from next financial year.
Jabil is currently trading just 14 times behind earnings. That’s a big discount for the techies Nasdaq-100 index’s trailing earnings multiple of 34. Investors may want to consider buying Jabil at this incredibly cheap valuation in light of the strong earnings growth the company is expected to deliver, as that could lead to impressive upside potential in the future.
For example, if the market decides to reward Jabil’s double-digit growth with a richer valuation, the stock could continue to rise. Assuming that Jabil reaches earnings of $11.16 per share after a few years (as shown in the previous chart) and at that point trades at 27 times forward earnings (in line with the Nasdaq forward earnings multiple 100), the share price could fall. $301. That would be more than double Jabil’s current stock price.
Investors looking to buy an AI stock that is affordable now and has the potential to post solid gains in 2025, and over the long term, should take a closer look at Jabil before it soars higher.
Consider the following before buying shares in Jabil:
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
These Incredibly Cheap Tech Stocks Are Soaring, and Artificial Intelligence (AI) Could Send It Higher in 2025 and Beyond Originally published by The Motley Fool
