Symbotic Inc. NASDAQ: SYM emerged as a must-have next-gen technology over the past year, and its Q3 results prove the thesis. The company's AI-powered warehouse automation is in such high demand that results blew past consensus, led to a guidance improvement and brought the first adjusted profits ahead of schedule.
Because the outlook for warehouse automation is robust and Symbotic is the leader, the odds are high that business will continue to accelerate over the next few quarters.
The business drivers are the expanded partnership with SoftBank Corp. OTCMKTS: SOBKY. SoftBank was already a major investor and customer for Symbotic but doubled down with a joint venture. The deal includes additional funding and investment to form GreenBox. This start-up aims to bring warehouse automation to small and medium-sized businesses on a rental or rent-to-own basis.
Symbotic outpaces consensus, guides higher
Symbotic had a solid quarter driven by four new system deployments and commissioning two. The net result is $392 million in revenue for a gain of 60.4% in Q4.
The revenue growth is down from earlier in the year but has the company up 98% on a full-year basis, with solid double-digit growth expected over the next year, and it is 2,700 basis points better than the consensus estimate. Growth was seen in all three segments but underpinned by systems sales. System sales came in at $380.2 million, or about 97% of sales. That mix will shift over time, but it will be slow.
Margin news is also good, with costs rising in alignment with revenue growth and spending in control. The gross margin held steady near 40%, with gross profit rising 60% and the net loss shrinking compared to last year. The detail that has the market up 26% is adjusted EBITDA profits reported for the first time, several quarters ahead of schedule, and the guidance suggests positive cash flow into the future.
The guidance is a catalyst for sure. The company increased the first-quarter revenue and earnings outlook to above the consensus target, and both seem light. The revenue target of $350 to $370 is a sequential slow-down not expected due to the momentum shown in 2023.
Analysts help drive Symbotic higher, with more highs to come
The analyst's activity is already heating up following the release and guidance update. MarketBeat.com is tracking three new revisions issued within the first 18 hours of the report, all bullish.
The weakest is a reiterated "buy" rating with an above-consensus price target compounded by two boosted targets. These analysts view the stock as fairly valued above the broader consensus $50 target where the stock is now trading.
The consensus rating is a "strong buy." The consensus price target is trending higher and more than double compared to last year. Assuming this trend continues, this stock could easily trade near the high end of the analysts' current range, which has it teetering on the edge of new highs.
Don’t fear the high valuation; Symbotic worth it
The stock is trading at a high 200X its 2024 earnings outlook, but don't let that scare you away. Because the company is on track to post profits sooner and leverage is building, it will likely outperform the 2024 estimates. Additionally, the consensus figures for 2025 have the valuation cut in half, and growth should continue from there. In this scenario, the stock is undervalued relative to its growth trajectory, which is getting priced into the market now.
The technical outlook is robust. As daunting as the $26 price gap is on the daily charts, it shows up as a solid green candle confirming an uptrend on the weekly chart. This chart shows the market moving up after a correction and consolidation in alignment with its results and outlook.
Because the outlook is so robust, the market could quickly continue into the $55 to $60 range and possibly retest the all-time highs by the end of the year. If the analysts continue to raise their targets, this rally could sustain well into next year and set new highs throughout the year. The risk is that resistance will cap gains near $55 to $60, keeping this stock price sideways until more news is available. It's a quality buy-on-the-dip candidate for tech and growth investors.
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