Jabil (JBL) has received a #2 (Buy) ranking and an A grade for Value from Zacks Investment Research, highlighting its robust earnings outlook and strategic positioning within the burgeoning AI-related markets. This endorsement, coupled with an expanded partnership with Endeavour Energy for advanced AI infrastructure, underscores the company's potential for sustained growth despite some headwinds in its non-AI segments.

Jabil Inc. (NYSE: JBL) has recently garnered significant attention from Zacks Investment Research, which assigned the company a strong #2 (Buy) ranking and an A grade for Value. This recognition is attributed to Jabil's favorable valuation metrics, including competitive Price-to-Earnings (P/E) and Price-to-Earnings Growth (PEG) ratios when compared to its industry peers, alongside a robust earnings outlook and substantial cash flow generation. The company's strategic focus on AI-related markets is identified as a primary catalyst for its near-term growth trajectory.

The Event in Detail

The Zacks Rank #2 (Buy) signals a strong outlook for Jabil, indicating potential outperformance in the coming months. The accompanying A grade for Value is based on an analysis of Jabil's current valuation, with its P/E ratio of 15.42 positioned below the industry average of 16.51. Similarly, Jabil's PEG ratio stands at 1.23, marginally lower than the industry's 1.29, suggesting that the company's growth prospects are not fully reflected in its current stock price.

A significant driver for this positive outlook is Jabil's expanded collaboration with Endeavour Energy LLC. This partnership is designed to deliver modular, just-in-time AI infrastructure, boasting an impressive capacity of up to 2 gigawatts annually. The initiative combines Endeavour's innovative data center design with Jabil's extensive manufacturing capabilities to create waterless, grid-agnostic infrastructure through Endeavour's Edged data center platform. This advanced model is projected to reduce upfront investment by as much as 90% and accelerate infrastructure deployment by 50-60% compared to industry standards.

Analysis of Market Reaction

The market's positive sentiment towards Jabil largely stems from its proactive and strategic positioning within the rapidly expanding AI sector. The Zacks Investment Research endorsement reinforces investor confidence, suggesting that Jabil is currently undervalued given its growth prospects and solid financial footing. The company's focus on AI infrastructure is seen as a pivotal move to capitalize on one of the most significant technological shifts of the decade.

Jabil has committed to an approximate $500 million investment in a new U.S. manufacturing facility dedicated to AI rack and liquid cooling solutions. This investment is anticipated to be operational by mid-2026, further solidifying Jabil's capacity and footprint in this critical growth area. The partnership with Endeavour is a direct manifestation of this strategy, aiming to eliminate capacity bottlenecks and minimize overbuild risk by aligning infrastructure delivery with real-time demand.

Broader Context and Implications

Jabil has demonstrated strong market performance, with a remarkable 92% return over the past year. Looking ahead, the company projects revenue of $34.3 billion and earnings of $1.3 billion by 2028. Achieving these targets would require a 6.4% yearly revenue growth and a substantial $723 million earnings increase from the current $577.0 million.

Analysts are increasingly optimistic about Jabil's AI segment. The company recently increased its AI-related revenue forecast to $8.5 billion for fiscal 2025, representing over 50% year-over-year growth. Firms like BofA Securities and Barclays have responded by raising their price targets for Jabil to $245 and $223, respectively. Stifel has also resumed coverage with a Buy rating, specifically citing the company's growing exposure to AI infrastructure. The Simply Wall St community estimates Jabil's fair value to be between US$227.50 and US$274.75, suggesting a potential 6% upside from its current price.

Despite the robust growth in AI, Jabil faces headwinds in other segments. The Regulated Industries segment, encompassing automotive, healthcare, and renewables, has remained flat year-over-year due to subdued demand in electric vehicles (EVs) and renewable energy. The Connected Living & Digital Commerce segment, focused on consumer-facing products, experienced a 7% year-over-year decline. These non-AI segments collectively contribute over half of Jabil's total revenue, creating visible challenges for overall growth. Furthermore, rapid investments in AI-related infrastructure are expected to exert near-term pressure on profitability, with the core operating margin guidance maintained at 5.4%.

Expert Commentary

Zacks Investment Research highlighted Jabil as a "strong value stock" due to its "favorable P/E and PEG ratios versus industry peers," signaling its perceived undervaluation. The significance of the Endeavour partnership was underscored by Jakob Carnemark, Founder and CEO of Endeavour, who stated:

"This collaboration represents the latest, and most critical, step in a 30-year journey in data center infrastructure."

Echoing this sentiment, Matt Crowley, Executive Vice President of Global Business Units at Jabil, noted that the partnership directly addresses:

"both the technological and business challenges our customers face in the AI era."

Looking Ahead

The future performance of Jabil will largely hinge on its continued success in capitalizing on the escalating demand for AI infrastructure. Investors will closely monitor the execution of the Endeavour partnership, particularly with the scheduled launch of their just-in-time platform in the United States in the first quarter of 2027. While the company's Cloud and Data Center Infrastructure business segments have shown remarkable strength, the persistent weakness in non-AI sectors, such as EVs and renewables, warrants careful observation. Jabil's ability to manage potential margin pressure from ongoing AI investments and to effectively integrate its new U.S. manufacturing capabilities will be critical in sustaining its growth trajectory and validating its current valuation, which some analysts consider "full with a limited margin of safety" at 19x next twelve months (NTM) P/E.