Morgan Stanley upgrades Zebra Tech on improved demand outlook

Investing.com -- Morgan Stanley has upgraded Zebra Technologies Corporation (NASDAQ:ZBRA) to “equal weight” from “underweight” on healthier consumer data, improving retail capital expenditures, and de-risked 2025 estimates.

Brokerage said the risk-reward scenario for the stock is looked more balanced, despite maintaining concerns over its valuation being slightly ahead of recovery.

Morgan Stanley (NYSE:MS) highlighted that Zebra's demand environment is expected to improve over the next 12 months, driven by stronger trends in retail, e-commerce, and transportation&logistics end-markets, along with a normalization in large customer activity.

MS also pointed to an upward revision of 2025 retail and distribution capex estimates, with a notable 360 basis points increase, which further supported its positive outlook.

The upgrade follows improving trends in e-commerce and consumer data, with retail capex expectations for 2025 rising by approximately 9.8% year-on-year, an improvement from the previous forecast of 6.2%.

Morgan Stanley raised its price target on Zebra to $400, up from $305, based on a revised earnings outlook and improved demand dynamics. It expects company to move past the risks associated with the e-commerce overbuild, a key concern that previously led Morgan Stanley to adopt an underweight rating.

“We believe the name lacks a negative catalyst over NTM as demand environment is improving and large customer activity continues to normalize, leading to our view for minimal downside to FY25 estimates,” analyst wrote