An Affordable AI Stock to Consider Before Its Value Soars
Jabil’s Stock Performance and Future Prospects
Overview of Jabil
Jabil, a prominent contract electronics manufacturer and publicly traded company under the ticker symbol JBL on the NYSE, has demonstrated significant stock price growth of 27% over the last nine months. Despite facing a sharp decline in mid-February 2025, the recent dip in stock price presents a potentially favorable opportunity for investors, especially considering the company’s positive growth outlook.
Services Offered by Jabil
Jabil provides a wide range of design, production, and manufacturing services. Their clientele spans several industries, including:
- Cloud and data centers
- Semiconductor capital equipment
- Networking and communications
- Automotive and transportation
In recent months, Jabil has made considerable investments in artificial intelligence (AI) infrastructure, a strategic move that has contributed to its optimistic growth forecasts. In December 2024, Jabil raised its growth projections for the current fiscal year, reflecting broader market trends and industry demand.
Recent Financial Performance
On March 20, 2025, Jabil announced its fiscal 2025 second-quarter results, revealing impressive performance that exceeded Wall Street estimates. Notably, the company adjusted its revenue expectations upward to $27.9 billion, a notable increase from its previous estimate of $27.3 billion. Additionally, Jabil raised its earnings forecast to $8.95 per share, reflecting consistent growth in previous quarters.
AI’s Impact on Growth
The AI sector has been a critical factor behind Jabil’s increased revenue guidance. The company anticipates generating up to $7.5 billion from AI-related operations in the current year, signifying a 40% increase compared to the previous year. Management attributes this growth to a burgeoning demand for various AI-related products and services, particularly in:
- Servers
- Racks for mounting graphics processing units (GPUs)
- Advanced networking equipment
- Storage and testing gear
As AI applications continue to expand, Jabil is well-positioned to tap into this lucrative market, which currently accounts for 25% of its total revenue. By 2030, the AI server market is expected to increase nearly sixfold, while AI networking hardware is projected to grow annually by 34% through 2028.
Margins and Earnings Growth
Jabil is also benefiting from enhanced margins in its intelligent infrastructure segment, where its AI solutions are sold. The company’s adjusted operating margin in this area saw a year-over-year increase of 110 basis points last quarter. Analysts are optimistic about Jabil’s growth prospects, with projections indicating double-digit growth in earnings for the next couple of fiscal years typically aligned with advancing AI market trends.
Valuation Compared to Industry Peers
Currently, Jabil’s stock trades at just 15 times its anticipated forward earnings. This figure is notably lower than the 25 times forward earnings multiple of the Nasdaq-100 Index, which serves as a benchmark for tech stocks. As Jabil continues to enhance its earnings growth outlook, its AI-driven margins could lead to significant growth in the upcoming years.
Specifically, if Jabil’s valuation aligns with the Nasdaq-100’s, its stock price could potentially soar to $294—an increase of 116% from the current price—based on projected earnings of $11.75 per share after a couple of years.
Considerations Before Investing
Potential investors should weigh their options carefully. While Jabil presents an attractive investment opportunity due to its growth potential, it’s essential to consider that it was not included in the Motley Fool Stock Advisor’s latest list of top stocks. Historical performances, like those of Netflix and Nvidia, which were both high performers after being recommended by Stock Advisor, highlight the potential volatility in tech stocks.
Investors looking to diversify their portfolios might find Jabil to be a noteworthy candidate, particularly given the current favorable conditions for tech and AI-driven companies.
