Shares of contract electronics manufacturer Jabil (JBL -1.17%) have been in fine form over the last few months thanks to its solid quarterly results, and the good news is that the company looks set to enter the new year with momentum on its side following its latest report.
Jabil released its fiscal 2025 first-quarter results (for the three months ended Nov. 30) on Dec. 18. The stock jumped as the company's numbers were well ahead of Wall Street's expectations. Even better, Jabil raised its full-year guidance and pointed out that the proliferation of artificial intelligence (AI) is going to give its business a nice boost.
Let's take a closer look at Jabil's latest quarterly results and determine if this stock could sustain its impressive momentum in 2025 and beyond.
Jabil is doing well despite challenges
Jabil's revenue in fiscal Q1 came in at $7 billion, exceeding the company's guidance of $6.3 billion to $6.9 billion. It reported non-GAAP earnings of $2 per share, which was well above the midpoint of its $1.85 per share guidance. It is worth noting that Jabil's top line fell 17% from the prior-year period, while its adjusted earnings were down by 23%. This decline was on account of Jabil's divestment of its mobility business that was completed in December 2023.
Excluding the impact of that divestiture, Jabil's revenue was up 1% from the year-ago period. Also, Jabil's performance during the quarter was impacted by hurricanes Helene and Milton, which forced the company to close its facilities for a couple of weeks and impacted its revenue. Management points out that Jabil's margin was impacted by 10 to 20 basis points because of the hurricanes, but it still managed to exceed its earnings guidance.
Even better, Jabil has raised its fiscal 2025 revenue guidance to $27.3 billion from the earlier expectation of $27.3 billion. It now expects to end the year with $8.75 per share in adjusted earnings as compared to the prior guidance of $8.65 per share. It won't be surprising to see Jabil boosting 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 fabrication and test equipment, which we expect to continue throughout FY25 and beyond." Moreover, the company's largest hyperscale customer has strengthened its existing relationship with the company for integrating custom AI chips into server racks, and it has also landed a new hyperscale customer for its silicon photonics solutions.
The company is confident that growing demand for liquid-cooled AI servers is going to create a long-term tailwind, and that's not surprising considering that this market is set to grow rapidly in the future. After all, liquid cooling in data centers is forecast to increase at an annual rate of 24% through 2033, generating almost $40 billion in revenue at the end of the forecast period. Moreover, silicon photonics demand 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 from the next fiscal year, and a look at consensus revenue forecasts for the next couple of years suggests the same.
JBL Revenue Estimates for Current Fiscal Year data by YCharts
The improvement in the top line is set to filter down to the bottom line as well, with analysts expecting Jabil to deliver double-digit earnings growth from the next fiscal year.
JBL EPS Estimates for Current Fiscal Year data by YCharts
The valuation makes buying Jabil stock a no-brainer
Jabil is trading at just 14 times trailing earnings right now. That's a big discount to the tech-laden Nasdaq-100 index's trailing earnings multiple of 34. Investors can consider buying Jabil at this incredibly cheap valuation in light of the strong earnings growth that the company is forecast to deliver, as that could lead to impressive upside going forward.
For example, if the market decides to reward Jabil's double-digit bottom-line growth with a richer valuation, the stock could keep soaring. Assuming Jabil hits $11.16 per share in earnings after a couple of years (as seen in the previous chart) and it trades at 27 times forward earnings at that time (in line with the Nasdaq-100's forward earnings multiple), its stock price could hit $301. That would be more than double Jabil's current stock price.
So, investors looking to buy an AI stock that's affordable right now and has the potential to deliver solid gains in 2025, and in the long run, should take a closer look at Jabil before it flies higher.
