Shares of Symbotic (SYM 0.58%) fell on Tuesday, down 10.9% in today's trading.
Symbotic's stock has been on an absolute tear this year, up over 130% for 2025, even after today's downturn. But with a sky-high valuation and much of Symbotic's business coming from just one customer, one Wall Street analyst decided to downgrade shares on those dual risks.
NASDAQ: SYM
Key Data Points
UBS gives the thumb's down to Symbotic
On Tuesday, Wall Street bank UBS cut its rating on Symbotic to sell from its prior neutral stance, even as the firm raised its price target from $27 to $35. For reference, Symbotic stock trades just over $54 as of this writing.
UBS analyst Damian Karas cited a few risks to the company's outlook. First, while revenue has grown a lot recently, the company's backlog hasn't really increased since 2023. Moreover, Symbotic's one big customer, Walmart, accounts for much of that backlog and is funding Symbotic's research and development. In addition, Karas points to competition in the warehouse automation space, noting that Symbotic is not the only company out there, with other decision-makers wary of committing to Symbotic's technology, per a recent survey.
In light of all these factors, Karas sees risks to the robust growth assumptions embedded in the company's sky-high valuation, noting, "We see the recent run-up and rerating as not justifiable."
Image source: Getty Images.
Beware of nosebleed levels here
Warehouse automation is no doubt the future of e-commerce and brick-and-mortar retail distribution centers. However, Symbotic trades at a very healthy 14.6 times sales, while the company continues to lose money. And while investing in money-losing growth companies can work, it might be hard to justify for a low-margin hardware company. Last quarter, Symbotic's gross margin was just 18%. Thus, it would take a lot of revenue growth for the company to generate the meaningful future profits needed to justify today's $32 billion market cap.
