KeyBanc Initiates Zebra Technologies (ZBRA) with a Hold

July 17, 2008 8:11 AM EDT

KeyBanc initiates coverage on Zebra Technologies (NASDAQ: ZBRA) with a Hold.

The firm said, "Over the long term, we believe ZBRA will benefit from its market leadership in the growing niche market for tagging, identifying and managing high-value assets. ZBRA possesses a unique portfolio of businesses and scale advantages that should enable it to generate above-average organic revenue growth, and maintain higher profitability than its peers. In addition, ZBRA has a strong balance sheet (about $300 million in net cash) and the opportunity for additional margin expansion, driven by a combination of volume growth, a mix of higher margin revenue from higher software sales, ongoing operational improvements and other cost reductions. We believe the outsourcing initiatives and recent acquisitions will drive profitability and growth in the coming years, but we still maintain a level of uncertainty surrounding these actions, especially combined with management's limited track record and the Company's exposure to weak end markets."

KeyBanc acknowledges that the share price is low relative to its historical range, but the firm believes that "investors would be best served to put money to work in names with more refined and diverse operations with less of a near-term operational workload and less dependence on potentially weak end markets."

Zebra Technologies Corporation engages in the design, manufacture, and distribution of specialty printing devices that print variable information on demand at the point of issuance.

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