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Robotics companies are no longer merely theoretical concepts. They are quickly becoming central to the transformation of industries around the world. Robotics adoption is increasing across industries such as manufacturing, healthcare, logistics, and retail, thanks to technological advancements in artificial intelligence (AI).
As businesses increasingly rely on automation to streamline operations and cut costs, robotics companies are emerging as major players with the potential to reshape the global economy. Symbotic (SYM) is one of the emerging players in this space. It is best known for its cutting-edge AI-powered robotic systems, which improve supply chain and warehouse management. SYM stock rose an impressive 329% in 2023, powered by strong revenue growth.
However, SYM stock has fallen 55.7% so far this year, while the S&P 500 Index ($SPX) has gained 18%. Nonetheless, Wall Street believes the stock could potentially climb by 88.9% over the next 12 months.
Surge in Automation Boosts Symbotic’s Financials
The rise of e-commerce and the COVID-19 pandemic highlighted the importance of automation due to the scarcity of manual labor. Warehouse automation, powered by robots, has become an essential component in ensuring the smooth operation of supply chains.
Symbotic’s end-to-end, AI-powered robotics and software platform can pick, sort, and pack goods with minimal human intervention. Symbotic's collaboration with global retailer Walmart (WMT) has been a critical growth driver. Walmart has invested heavily in Symbotic's AI and robotic automation technology, with an 11% stake in the company. Symbotic's robotic systems will be installed in 42 of Walmart's distribution centers across the nation, with the goal of reducing costs and increasing efficiency.
Other customers include Target (TGT), Albertsons (ACI), Giant Tiger, Associated Food Stores, and many others. In the third quarter of fiscal 2024, total revenue at Symbotic increased by 57.7% to $492 million. While this is impressive, third quarter growth was lower compared to the first two quarters of fiscal 2024. Notably, total revenue increased by 78% in Q1 and 59% in Q2.
Management stated that the revenue slowdown is due to Symbotic improving its deployment process, which included ramping up five new systems in Q3. According to management, this should result in increased revenue in the first quarter of fiscal 2025.
Symbotic currently has 21 fully operational systems. Furthermore, its backlog of committed contracted orders totaled $22.8 billion.
Despite strong revenue growth, Symbotic is still working to maintain profitability. Its fiscal Q3 net loss of $0.02 per share came in lower compared to the year-ago quarter net loss of $0.07. High R&D costs and the significant capital required to scale its technology may have an impact on the company's financials in the short term. However, this is not unusual for a growing company.
While the current quarter was not profitable, the consensus estimate for the fourth quarter is a profit of $0.02. Recently, the company acquired all assets of industrial robot maker Veo Robotics. Symbotic expects the integration of Veo’s FreeMove 3D depth-sensing computer vision system into its warehouse automation system will enhance productivity.
Analysts who cover SYM anticipate significant revenue growth in the coming years. In 2024, the company's revenue could increase by 49.3% to $1.7 billion, with an additional 35.8% growth in 2025.
Moreover, analysts also expect the company to report a profit of $0.18 in 2024, up from a loss of $0.37 in 2023. Furthermore, earnings are expected to rise 161.1% to $0.46 in 2025.
What Does Wall Street Say About Symbotic Stock?
Recently, Craig-Hallum analyst Greg Palm assigned a “buy” rating for SYM stock. Separately, TD Cowen analyst Joseph Giordano maintained a “buy” rating on the stock with a price target of $43.
Overall, Wall Street remains bullish on Symbotic stock, with an overall “moderate buy” rating. Out of the 16 analysts in coverage, nine have a “strong buy” recommendation, two propose a “moderate buy,” four rate it a “hold,” and one suggests a “strong sell.”
Based on analysts' average price target of $42.93, Wall Street expects a potential upside of about 89% in the next 12 months. Plus, the Street-high target estimate of $60 implies the stock could climb by 164% from current levels.
Priced at 1.25x forward sales, SYM stock seems cheap for the hypergrowth expected in the industrial automation industry.
The Bottom Line on Symbotic Stock
The global warehouse automation market is expected to grow at a compound annual growth rate (CAGR) of 16.2% from 2024 to 2029, reaching $54.5 billion. As a market leader, Symbotic is well-positioned to capitalize on this trend. The company's strong partnerships with retail giants, cutting-edge technology, and expanding market presence lay the groundwork for future growth.
Furthermore, as other industries move toward automation, Symbotic will be able to capitalize on new growth opportunities.
No doubt, SYM's short-term prospects appear appealing and attainable. That said, growth stocks also carry risks. Symbotic's stock may offer significant upside to those with a long-term investment horizon and a belief in the ongoing evolution of automation as the company scales its operations and expands its reach across industries.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
