What happened
Symbotic (SYM -2.06%) stock is on fire this year. In July alone, shares of the warehouse automation company jumped 48%, according to data provided by S&P Global Market Intelligence.
It was a big month for Symbotic, as it bagged a multibillion-dollar contract and reported record revenue for its third quarter.
So what
Symbotic formed a joint venture called GreenBox with Japanese multinational company SoftBank Group in July. Symbotic will have a 35% stake in the venture and sell warehouse automation systems worth $7.5 billion to GreenBox over a six-year period, starting from fiscal 2024. Symbotic's financial year ends Sept. 24.
It's a big deal for two reasons: global reach and revenue potential. GreenBox will use Symbotic's systems to automate supply chain networks for third-party customers globally, thereby expanding Symbotic's international footprint significantly.
More importantly, the company expects the contract to generate more than $500 million in annual revenue from software, parts, and services once all its systems are operational. Symbotic's systems are typically fully operational within 24 months of design approval.
The company's revenue is already growing steadily. Its revenue for the quarter ending June 24 hit a record, surging 78% year over year. Although Symbotic's Q3 operating loss widened by 27% to $42 million, it improved by the same percentage point sequentially.
After that solid revenue growth and the big contract from GreenBox, Symbotic stock attracted several analyst upgrades in July and continues to do so this month. The latest upgrade is from Citi analyst Andrew Kaplowitz, who has given the company one of the highest price targets of $70 a share, according to TheFly.com. Among other things, Kaplowitz thinks Symbotic's "outsourcing initiatives" are gaining traction and sees earnings momentum building up in the automation company, especially after its solid last-quarter numbers.
Now what
Thanks to the GreenBox contract that added $11 billion to Symbotic's backlog, the automation company's total backlog shot up to $23 billion as of July 31. The company should start generating systems revenue from GreenBox from fiscal 2024 and annual recurring software revenue from fiscal 2026.
Meanwhile, Symbotic is projecting nearly 23% growth in revenue at the midpoint for its fourth quarter. That means its revenue for the full year could rise as much as 80% or more.
While that's not as high as the 136% growth in revenue the company saw in 2022, there's no denying that Symbotic's revenue is still growing at a torrid pace. It's no surprise the industrial stock skyrocketed in recent weeks.
