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As the world delves deeper into a new era of technological innovation, the spotlight shines brightly on companies at the forefront of artificial intelligence (AI) and robotics. One such standout player is robotics company Symbotic (SYM), whose shares have scored dazzling gains so far this year. Its stock is up 177% year-to-date, outperforming the S&P 500 Index’s ($SPX) gain of 14%.
It doesn’t come as a surprise to see SYM shares rally, given that most tech stocks are riding the AI wave. Also, Symbotic’s strengthening fundamentals, as depicted by its results in the first three quarters of fiscal 2023, have aided this growth story. Nonetheless, investors might now be wondering if they missed out on this AI stock, and whether there is any more upside left to be had.
Currently, Symbotic’s stock is down 48% from its 52-week high. Should you buy the dip now as the unfolding AI era looks set to strengthen the fundamentals of this robotics company even further? Let’s find out.
What Does Symbotic Do?
Before we dive into its financials, let’s understand what exactly the company does. Symbotic, with its ground-breaking end-to-end, AI-powered robotic and software platform, has been reshaping the way warehouses operate. Its goal is to improve warehouse efficiency by revolutionizing the entire supply chain process. Its customers include Walmart (WMT), Target (TGT), Giant Tiger, C&S Wholesale Grocers, and Albertsons (ACI), the last of which is in the process of being acquired by Kroger (KR).
Symbotic's robots navigate warehouses autonomously, using advanced algorithms and AI to collect, store, and transport products, minimizing reliance on human labor.
Being a top player in a lucrative market has its perks. In the third quarter of fiscal 2023, total revenue grew an impressive 77.3% to $312 million, driven by the strong performance of both existing and new deployments. CEO Rick Cohen stated on the Q3 earnings call that Symbiotic now has “10 fully operational systems and 33 systems in the process of deployment with multiple customers.”
Symbiotic is not yet profitable, but it is working to reduce its losses. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) losses have come down from $22 million in Q3 fiscal 2022 to $3 million in Q3 fiscal 2023.
Recently, along with SoftBank Group, it announced a joint venture named GreenBox, which will be the “exclusive provider of Symbotic systems in the warehouse-as-a-service market and will make supply chain services available to customers.” Symbiotic expects GreenBox to add $500 billion to its total addressable market each year.
Symbotic Faces Several Challenges
While Symbotic's advancements are remarkable, there are many challenges the company faces that might be restricting its growth. Acceptance and integration of such sophisticated technology doesn’t come easy. There is initial hesitance about implementation costs, infrastructure changes, and workforce implications.
However, I believe with the increasing demand for efficiency and the rapid evolution of e-commerce, Symbotic's long-term prospects look promising. It could soon see green in its bottom line.
Investors should keep an eye out for Symbotic's fourth-quarter results this month, which are expected around Nov. 21, to gain a better understanding of the company's growth strategies.
For the fourth quarter, Symbiotic anticipates revenue in the range of $290 million to $310 million and adjusted EBITDA to be in the $0 million to $3 million range. Meanwhile, analysts forecast revenue of $307 million in Q4.
Looking ahead, analysts foresee its losses narrowing down to $0.06 per share for the fiscal year ending Sept. 2023, compared to a loss of $0.13 in fiscal year 2022. Additionally, analysts predict Symbotic to be profitable by fiscal 2024, with earnings per share around $0.24.
What Does Wall Street Say About Symbotic?
On Oct 3, KeyBanc Capital Markets analyst Ken Newman gave Symbotic stock a “buy” rating with a target price of $50. In a note to clients, the analyst stated, “The industrial automation industry remains ripe for increased investment and adoption supported by multiple secular crosscurrents."
Overall, Wall Street remains bullish on SYM, driven by a tightening labor market and growing demand for AI-driven warehouse automation. At present, out of the 13 analysts following Symbotic stock, 7 have a “strong buy” recommendation, 2 propose a “moderate buy,” and 4 call it a “hold.” The stock has no “sell” recommendations.
Based on analysts' average price target of $51.42, Wall Street expects a potential upside of about 55% in the next 12 months. The target price ranges from a high of $65 to a low of $32. Priced at 1.7 times forward sales, the company seems reasonably valued, based on its fiscal 2024 revenue growth forecasts.
The Key Takeaway
As industries increasingly focus on automation to stay competitive, Symbotic is poised to play a pivotal role in the transformation of logistics and supply chain management, driving its revenue higher. However, Symbotic’s lack of profitability and exposure to an evolving niche make it a risky stock. Keeping this in mind, investors with a healthy risk appetite might start with a small investment in Symbiotic alongside a diversified portfolio of stable stocks.
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.
