Symbotic (SYM -2.98%) stock has gone ballistic. A stunning rally of 38.9% in July drove the stock's half-yearly performance to a staggering 127.5%, according to data provided by S&P Global Market Intelligence. On Aug. 5, Symbotic hit a 52-week high of $64.16 per share.
Symbotic automates warehouses and distribution centers with its artificial intelligence (AI)-powered robots and software. Symbotic's deal with Walmart (WMT 0.13%), in particular, has spurred massive investor interest in its stock, with several analysts upgrading their price targets in recent weeks.
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Why are analysts turning bullish on Symbotic stock?
Analysts from Citi, Arete, Northland, and Oppenheimer were among those that initiated coverage or upgraded their price targets on Symbotic stock in July.
While Arete has a price target of $50 per share on Symbotic, analysts from Northland raised their price target on the AI stock to $56 per share from $35 a share. Citi analyst Andrew Kaplowitz upped the stock's price target to $60 from $29 per share.
Oppenheimer analyst Colin Rusch, meanwhile, raised Symbotic's price target from $35 per share to $54 a share in July, and then by another $5 in early August.
In January, Symbotic acquired Walmart's advanced systems and robotics (ASR) business and signed a commercial agreement with the retail giant to deploy robotics automation systems for up to 400 accelerated pickup and delivery (APD) centers at Walmart stores over the next few years. Symbotic estimates incremental backlog of $5 billion from the deal.
As news of Walmart testing "dark stores" to fulfill online orders hit the headlines in late June and through July, investors analysts bumped up their expectations from Symbotic stock and drove its price higher. Shares hit a new 52-week high of $64.16 ahead of earnings on Aug. 5.
Could Symbotic stock lose momentum from here?
Symbotic beat estimates with 26% year-over-year growth in revenue for its third quarter. Its net loss, however, widened to $32 million from $21 million a year ago because of restructuring charges. Moreover, the company's Q4 revenue guidance of $590 million to $610 million would mean only 4% year-over-year growth at the midpoint.
Investors don't want to see a deceleration in sales from a growth stock that's yet to turn profitable. Yet investors should also look beyond the headlines.
Symbotic is ready to deploy a next-generation storage system at warehouses that should significantly improve storage capacity and handling. The company, however, is facing startup problems, but expects them to be a temporary blip. Management insisted that none of it affects the company's backlog, which stands at a solid $22.4 billion today. To put that number into perspective, Symbotic generated revenue worth $1.8 billion last year.
Long story short, Symbotic could face some quarters of slow revenue growth, but that shouldn't hurt the long-term growth potential of this AI and robotics stock.
