This is what is going on currently with Jabil Circuit, Inc. (NYSE:JBL). Last month, the company reported earnings of $0.43 per share, compared to $0.46 in the same quarter last year and its guidance for the ongoing quarter was below estimates. As a result, the stock is down over 15% from its January highs.
One of Jabil Circuit, Inc. (NYSE:JBL)’s biggest customers, RES.IN MOT.DBA BLACKBERRY (FRA:RI1), is putting strong efforts in bringing the company back on track. BlackBerry managed to earn a profit of $94 million in the fourth-quarter of its fiscal 2013, and reported sales of roughly 1 million RES.IN MOT.DBA BLACKBERRY (FRA:RI1) 10 devices.
RBC Capital Markets reports that 45% of Z10 users are coming from iPhone or Android. It recently received its largest ever single largest order for over 1 million BlackBerry 10 devices. The company will be launching a set of new phones using its BlackBerry 7 OS which will improve its foothold in the emerging markets. As RES.IN MOT.DBA BLACKBERRY (FRA:RI1) regains its foothold in the market, it will be a huge boost for Jabil Circuit, Inc. (NYSE:JBL)’s growth.
Jabil Circuit, Inc. (NYSE:JBL) recently acquired Nypro Inc., which specializes in making plastic products. Nypro Inc. already has more than $1 billion in revenue. The combination with Nypro would open an exciting new market for the company. Apple Inc. (NASDAQ:AAPL) is rumored to be planning on a cheaper iPhone to gain further market share in countries like China and India.
According to RBC analyst Apple Inc. (NASDAQ:AAPL)will try to sell it under $400. Analysts estimate the cheap iPhone will generate $22 billion in sales in 2014. Jabil Circuit, Inc. (NYSE:JBL) already produces aluminium casing for Apple Inc. (NASDAQ:AAPL)’s iPhones and if Apple Inc. (NASDAQ:AAPL) does comes out with a cheaper version with plastic casing, then this acquisition will prove to be a huge boon for the company.
Besides the above mentioned growth factors, Jabil Circuit, Inc. (NYSE:JBL) also pays a healthy dividend yield of 1.9%, which will ensure a steady return on your capital till the market gives the company its fair valuation. Considering the above factors, a forward P/E of 6.28 clearly seems below par. Analysts have a median price target of above $22, which is a whopping 31% ahead of its current price.
Foolish takeaway
With the economy slowly coming out of recession, discretionary spending among consumers will increase, leading to strong growth for these companies. Both the companies are relatively cheap and once the Street realizes their growth potential, their prices are only going to go northwards.
The article A Sneaky Way to Play the Consumer Electronics Boom originally appeared on Fool.com is written by Rahul Giria.
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