Robotics stock Symbotic (SYM 1.62%) was a huge winner last year. The stock's 275% run over 12 months exceeds even the performance of Nvidia, the face of the AI craze. Considering that the broader market historically averages 10% annual returns, having a year like Symbotic did is rare.
Surely, the party is over. Investors buying today are chasing. Right? It's easy to let the share price write the narrative, especially after huge gains. But only the numbers can tell investors whether a stock's a good deal. So, let's look under the hood and see whether Symbotic's epic journey has room to run.
Symbotic is reshaping the supply chain
Online shopping is so effortless. Just point and click, and it ships. But behind the curtain is a complex machine called the supply chain. Millions of items are stored and managed in warehouses and distribution centers. They must be found, picked, packed, and shipped as efficiently as possible. The system must track every movement in real time to ensure items aren't lost and the next shopper knows what items are in stock.
Symbotic is ushering in the next generation of the supply chain. Symbotic sells proprietary automation systems for warehouses and distribution centers. Using a combination of sensors and artificial intelligence (AI), the robots are fully autonomous. They can move throughout the warehouse, gathering items and performing tasks. The system also stores pallets more efficiently, increasing the value customers get from each square foot of space.
The company developed its system over 16 years, spending $600 million on research and development to win over 350 patents. It's far easier for major retailers to purchase a solution than try and develop something in-house. Some of the most supply chain-intensive companies already buy from Symbotic, like Walmart, Target, Albertson's, and more.
High growth and hearty financials
To date, Symbiotic has nine customers using 35 total systems. That's not much to hang your hat on, but it leaves much room to grow. Symbotic makes money in a few different ways. First, it sells its systems. The systems come with 15-year contracts, creating long-term, recurring revenue from servicing, parts, and software.
Additionally, the company entered a joint venture over the summer with Soft Bank to create Green Box, a separate entity that will sell warehousing-as-a-service using Symbotic's systems. These will be Green Box distribution centers that will be rented to third-party tenants.
Long-term growth is already stacking up. The company has done $1.1 billion in revenue over the past year but has $23 billion in backlog contracts (remember, this is spread out over these long contracts). Symbotic's financials took off in 2023. Over the past year, the business turned cash-positive, doing $209 million in free cash flow, over 17% of revenue.
SYM Free Cash Flow data by YCharts
Being this profitable (cash flow-wise) this early in the game is a green flag. Revenue should continue outpacing costs. Analysts expect earnings-per-share (EPS) of $0.23 this year and $0.61 in 2025. That rapid earnings growth could help digest much of the stock's gains.
Future revenue streams from services and Green Box should also carry higher profit margins. Symbotic could be a tremendous cash cow, with years of solid earnings growth ahead.
But has the stock price gone too far, too soon?
Whether you buy the stock might depend on your patience. There's no denying that Symbotic is a really expensive stock. Its shares sport a price-to-earnings ratio (P/E) of 195 based on 2024 estimates. Even though hitting 2025 estimates (no guarantee) would whittle that valuation down to 75, you'd be two years into holding the stock and hoping Symbotic executed well over those eight quarters.
Investors were right to jump on the stock in 2023. Symbotic's revenue and earnings growth potential is enticing. But the price tag now looks like a stock that multiplied its share price in just 12 months. Investors may want to consider waiting for air to come out of the balloon. These high-flying stocks are often volatile, so investors could get a better buying opportunity if they can wait it out.
