Symbotic Stock (SYM) Prediction: 2024 Outlook - Boom or Bust?
Symbotic stock has been fascinating to study and invest in the last couple years as it quickly went from $10 a share to a high of $63 and is now settling somewhere in between.
Here is a summary of the company if you haven’t read my bagillion articles on it:
It has been a volatile ride for SYM 0.00%↑ which, in the run up to earnings last week rose over 20%, the day after earnings tanked over 20% and now in the days that followed gained 25%, bringing it just about back up to the price it was… a week ago. Here is a visual of what that was like:
It has been a rollercoaster. While long term I am still bullish on the company, short term I think there are some issues emerging.
Let’s start with the valuation. There are many ways to value a company, but since Symbotic is not yet profitable, I like to look at its price to sales ratio. For context, Tesla’s price to sales ratio currently sits around 7 and many feel that company is incredibly overvalued. Well, if TSLA 0.00%↑ is overvalued at a price to sales of 7, Symbotic definitely is at a price to sales of 20.
What is maintaining this company’s astronomical valuation is its astronomical growth rate. In 2023, the company was routinely putting up triple digit percentage growth rates. In Q1 of 2023, it grew revenue 168% and Q2 2023 it grew 177%. But growth rates seem to be steadily declining now.
In Q3 of 2023, revenue grew 78%, Q4 it grew 60% and Q1 of 2024 it grew 80%. But in the company’s Q2 of 2024 projections they are forecasting around 50% revenue growth.
The growth rate is clearly trending down. While these are still phenomenal growth rates, it’s impossible to keep this up forever and these declining growth rates will not support its valuation.
Now things could change, their Greenbox joint venture with SoftBank could take off, innovative products like Breakpack could start to contribute meaningfully as well. But so far, these things haven’t happened and it appears Greenbox revenue may start to appear toward the end of Q4. In the meantime the company still has a massive revenue backlog of $23 billion to work through and will have to balance delivering on those orders with continued new customer acquisition and growth.
The other frightening thing I’m seeing is high share dilution. Shares outstanding is up 43% year over year as of the first quarter. You can see below we went from 58 million shares to 83 million in 1 year.
Basically, as investors, we would like to see 3 things, or at least progress in the direction of:
dilution being greatly reduced
High growth rates
Profitability
While the company is getting closer to profitability, the other 2 parts are moving in the wrong direction.
While long term I do like Symbotic and it seems like a great, innovative company in a growing industry, short term I am scared.
I feel a bit like Luke Sywalker right now, having gone through seemingly the exact same cycle with another of my investments, a company called Palantir. PLTR 0.00%↑ went public and seemed to follow the same trajectory of massive growth. But after a few quarters, growth slowed and share dilution went up. Palantir, in a little over a year, went from $8, to around $40, then all the way back down to $8. It only recently recovered, in large part thanks to the artificial intelligence/ AI boom, which seems to have greatly benefited Symbotic too.
Having studied both these companies for years, I am now recognizing what I think is a similar cycle. Markets are cyclical. This could change, Symbotic could reverse the trend any quarter, but it is definitely something worth keeping an eye on.
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