The last years were turbulent and I believe Zebra will be a long-term beneficiary of these trends:

US inventories have gone through a sharp crash followed by rapid increase and overcapacity. Many companies got burned, especially retailers. Management teams are in disarray and change needs to happen!

Warehouse and retail companies face high employee turnover and low average tenures. To combat this Zebra offers handheld solutions that increase employee efficiency, helping offset these downsides and streamlining operations. Zebra also operates in many other industries, as you can see below. Many industries are ripe for productivity investments.

According to a study, 96% of retailers are investing in technology to improve operations(picture below). Another study suggests that the Supply Chain Management Market is expected to grow at a 9.4% CAGR to $45 billion in 2027. Zebra Technologies enjoys large tailwinds from this structural shift in global operations in most industries.

Zebra is a leader in most of these areas and keeps innovating.

Zebra innovates in two ways:

I personally experienced this increase in productivity this year at Wacken Open Air, where Cashless payments were introduced via an RFID chip in the festival wristband. This eliminated drunk people counting coins to pay for their 10th beer of the night, instead just holding their wristband against a scanner, massively increasing sales speeds. RFID is a particularly interesting market, projected to grow 12% CAGR to $35 billion in 2030. It's still a small segment for Zebra, but growing "well in the double digits" according to the last call.

Below is a look at the vast portfolio of services and solutions Zebra offers in one interconnected ecosystem. I believe that the company's 5-7% organic sales growth figure is conservative. I rather see management underpromising and overdelivering than the other way around.

I see a large margin and growth opportunity in software and data analytics, where the company is investing heavily. Currently, 80% of sales are hardware, with software making the hardware more sticky. Below is a quote from the CEO in Q2 21:

Capital Allocation should be a vital part of any investment thesis, Zebra has three main ways to allocate cash (in order of importance):

Valuation: Like I just mentioned, Zebra was highly overvalued in the 2020/2021 tech craze. Forward PE expanded to 35+ but finally came down back down under the historical median after a 53% drawdown. The FCF yield should be higher if we subtract settlement payments to Honeywell for a lawsuit that has been settled with a $360 million payment from Zebra. These 8 quarterly payments will impact FCF, but they are irrelevant long-term. Zebra also currently is impacted by high supply chain costs due to shipping prices, estimating a $200 million FY22 impact. If we adjust the $150m settlement plus $200 million supply chain impacts we get a 5.8% EV/FCF yield, significantly above the median 4.3% yield.

$ZBRA is a 5% position and I added $500 for this challenge

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