The past several years have been a roller coaster ride for Symbotic (SYM 1.62%) investors. The stock launched to much fanfare through a special purpose acquisition company (SPAC) in mid-2022, only to lose more than half its value in the months that followed.
However, excitement surrounding artificial intelligence (AI) and the potential for the company to revolutionize legacy logistics and warehousing solutions have sent the stock skyward, gaining 336% so far this year (as of this writing).
A quick look at the company's process, customer list, and growing opportunity will help illustrate why this stock has so much potential. Here are three things about Symbotic that the smartest investors know.
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1. Next-generation distribution networks
Getting inventory from Point A to Point B is one of the most critical and underappreciated processes for many businesses. In a world where next-day delivery is becoming the rule rather than the exception, retailers are having to rethink their legacy supply chain and logistics operations to be able to keep up with the frantic pace.
That's where Symbotic comes in. The company provides turnkey, end-to-end solutions for logistics and distribution networks. Symbotic's claim to fame is AI-powered software that controls a cadre of integrated warehouse robots that can customize even the most complex deliveries. Furthermore, by maximizing storage space and minimizing traffic, the system can store far more inventory into less space.
By using the Symbotic's system, companies can increase efficiency, lower transportation and operating expenses, and decrease labor costs. The company notes that the resulting cost savings -- which can amount to millions of dollars each year -- pay for the system in a flash, resulting in a significant return on invested capital (ROIC) for users.
2. Symbotic has a high-profile customer list
They say you can judge a person by the company they keep, which can be equally true of businesses. Symbotic's customer list reads like a Who's-Who of top-notch retailers, which also represents a significant vote of confidence in its systems.
Some of Symbotic's largest customers include Walmart, Target, Albertsons, and C&S Wholesales Grocers.
In fact, Walmart is so sold on Symbotic's AI-fueled robotic warehouse management systems that it expanded its original agreement to implement the system in all of its 42 regional distribution centers. Furthermore, Walmart owns an 11% stake in the company. Talk about putting your money where your mouth is.
3. A doubling of its addressable market
Earlier this year, Symbotic entered into an agreement with SoftBank, which owns an 8% stake in the company, to form GreenBox Systems, a warehouse-as-a-service joint venture. This collaboration expands Symbotic's total addressable market, adding $500 billion to its existing $432 billion, more than doubling its opportunity.
By providing future tenants with turnkey warehouse space, Symbotic is joining the growing trend to outsource logistics operations, which will appeal to a much larger cross-section of retailers.
This adds on to the company's existing strategy, which includes the expansion into new customers and new verticals -- including auto parts, home improvement, and apparel, as well as an expansion into new geographies.
Why Symbotic is a buy now
Earlier this week, Symbotic reported blockbuster results, which drove the stock up 40% on the day following its fiscal-fourth-quarter financial report.
For all the company's potential, Symbotic stock is still remarkably cheap. Despite more than quadrupling so far this year, the stock is priced at less than 2 times forward sales, though it isn't yet profitable.
It's still early in the company's growth story, and a lot will have to go right for it to succeed. However, if Symbotic's solution catches on further -- which at this point appears likely -- don't expect the fire sale to last.
