Do you want your stock picks to soar in as little time as possible? Most investors do, of course. There's just the not-so-small matter of risk. Generally speaking, the bigger the prospective reward is, the greater the odds of losing money.
The risks and rewards of owning a particular stock aren't evenly balanced for every single equity out there, though. If you dig deep enough, you can find stocks with more potential than the market is seeing, yet posing less risk than the market is presuming.
Take Symbotic (SYM +3.87%) as an example. It's an investment prospect that could realistically double your money in five years (or maybe even less). However, it doesn't pose the sort of risk that's so often paired with that degree of prospective gain.
What's Symbotic?
Don't sweat it if you've not heard of it. Most people haven't. It's a relatively young company, and with a market capitalization of only around $28 billion, it doesn't exactly turn a lot of heads.
For investors, though, a company's size isn't a key concern. Far more important is that organization's growth prospects, near as well as far. This, of course, is a function of that company's product or service. They not only need to be in demand but that enterprise's services and/or products also -- ideally – need to be at least as competitive as those of its rivals.
Symbotic's are.
In simplest terms, the company makes industrial automation solutions; you may know them better as robots. They're not the kind you might see in a science fiction film, though. Symbotic's tech consists of roller beds that convey goods from one point to another, robotic arms that can grab or place a packaged product, and even forklifts that ferry entire pallets of packages around. Its target market is retailers' warehouses, meeting the needs stemming from the ongoing growth of e-commerce businesses being cultivated by major retailers like Walmart. In fact, Walmart is Symbotic's biggest customer.
NASDAQ: SYM
Key Data Points
It's not exactly a new idea or even a new technology; the world's been automating mechanical activity for a long, long time now.
Symbotic's solutions are still game-changing, however. Its robotic arms can not only find and pull a particular product off a storage shelf and deliver it to a shipping operation, but they can also pick and wrap an entire pallet of items to be delivered to a particular location. The company's robotic forklifts carry loads of goods from one place to another without a driver. Aside from being very cool, these solutions are now cost-effective and make fewer mistakes than humans.
Artificial intelligence is a game-changer
This may be a bit surprising to anyone who got excited about industrial automation several years ago. The hype then didn't quite live up to expectations. Indeed, despite lots of advancements in this tech of late in recent years, the International Federation of Robotics reports that installations of industrial robots actually fell in pre-pandemic 2019. The market's growth has recovered in the meantime, but only because the swell of online shopping spurred by the advent of COVID-19 in 2020 required it.
The business's foreseeable future, however, is arguably more compelling than its recent past for one overarching reason. That's the melding of robots and artificial intelligence.
Symbotic's solutions have always been the hope for any organization managing merchandise warehouses. It just hasn't been possible until now. As Credit Suisse's Angus Muirhead explains:
Before AI, robots were automatons, performing a pre-determined set of coded instructions. With AI technology, robotic systems are becoming increasingly autonomous -- able to respond to and learn from changes in its surroundings. More autonomous robotics are also easier to set up and use, and are safer. Each of these benefits significantly expands the useful application of robotics and extends their addressable market potential.
An outlook from Precedence Research puts this potential in perspective, suggesting the worldwide robotics market will likely expand from last year's $72 billion to more than $280 billion in 2023. That's an annualized growth pace of nearly 15%, jibing with expectations from Polaris Market Research, Acumen Research, and others.
Symbotic is likely to capture at least its fair share of this growth. As its tech is specifically geared for the biggest driver of this market's growth, though (Precedence Research thinks the e-commerce logistics market is set to expand by more than 22% per year through 2023), Symbotic is actually positioned to capture more than its fair share of the market's expansion.
The frothy valuation doesn't appear to be a problem
The automated robotics market's predicted growth is clearly bullish for Symbotic. It's not this tailwind alone, however, that could double the current value of Symbotic stock. The other core reasons that shares of this company have a chance of doubling in value in five or fewer years are its anticipated revenue growth and the resulting swing to a profit expected for the current fiscal year.
The numbers: Analysts are looking for the company to double 2023's top line of $1.2 billion by 2025, pushing profits up to $0.02 per share for the 12-month stretch ending in September. That's a reversal of last year's per-share loss of $0.37, on its way to a 2025 profit of $0.60 per share.
To be clear, it's still an expensive stock, even based on that 2025 earnings consensus. Its unusual capitalization structure raises questions as well.
A rich valuation isn't likely to be a serious impediment to its gains, though, and to its longer-term gains in particular. Neither is the likelihood of dilution. This is a great growth story, and great stories support premium valuations. The fact that Symbotic is profitable -- even if only marginally -- only improves the odds of investors supporting a premium valuation.
