Shares of artificial intelligence (AI) robotics company Symbotic (SYM +0.37%) rallied 38.3% this week, according to data from S&P Global Market Intelligence.
Symbotic released its third-quarter earnings this week, showing impressive growth and adoption of its smart-warehouse automation hardware and software platform, shooting well past analyst estimates.
Investors are growing increasingly enthusiastic about AI and robotics, and how they can replace manual labor and streamline supply chains in the future. That being said, the stock looks a bit pricey here.
NASDAQ: SYM
Key Data Points
A blowout quarter for Symbotic
In its fiscal fourth quarter, Symbotic grew revenue to $391.9 million, up 60.3% and exceeding analyst estimates by a very significant $85 million. Losses per share of $0.08 were better than analyst estimates by $0.05.
Management noted a few important milestones, including four new system deployments and two new system commissions. It was also Symbotic's first quarter of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Management said that as of the end of the quarter, it had 12 full Symbotic systems operational, and another 35 in various stages of deployment. So as those other 35 systems are deployed, the company has a line of sight into more and more revenue growth.
The company's future is also backed by $23.3 billion of backlog, although $11 billion of that is due to GreenBox, which is the company's joint warehouse-as-a-service venture with SoftBank (SFTB.Y 7.44%).
Symbotic owns just 35% of that venture, but the nature of this "as a service" business should bring in $500 million of high-margin recurring revenue, according to management.
Is Symbotic's bright future priced in?
Symbotic appears to have bright future, with SoftBank choosing it as a partner, and its growth of recurring revenue streams picking up. Management also gave some impressive guidance, saying it believes gross margin will eventually be able to reach 60% as the company scales up. That would be a ridiculous expansion from last quarter's 19.3% gross margin.
But there appears to be at least some of that bright future priced into the stock already. The company's market cap is now $28.5 billion, when factoring in the value of its noncontrolling interests.
That means the stock trades at around 25 times trailing sales, which is quite expensive, and usually only appropriate for high-growth software stocks with even higher margins. So while Symbotic is no doubt executing quite well and has a bright future, investors might want to be careful chasing the stock here.
Interested investors really need to dig into the expectations of future growth and profitability, and weigh that against what's already in the stock's price. There doesn't appear to be much margin of safety here.
