Symbotic Stock Up 37% After Q4 Earnings ( SYM Stock Analysis)
Yesterday SYM 0.00%↑ reported another outstanding quarter and the stock is up 37% today. Every time you think the stock is due for a breather it just continues to be the gift that keeps on giving. We’ll break down the quarter, the outlook and what I’m doing.
Q4 Results
The company brought in $392 million in revenue, far above their projection of $290-310 million. Revenue grew 60% year over year. The company had 17 system builds in progress a year ago and has 35 today.
Recurring revenue streams are now profitable on the back of the company’s 12 fully operational systems and the company expects this segment to remain profitable from here on out. They believe recurring gross margins can trend to over 60%, they currently sit at 19.1% up from 18.3% last quarter.
Their order backlog grew to $23.3 billion and they have $548 million in cash.
Their adjusted EBITDA flipped positive: it was negative $20 million in Q4 of 2022, negative $3 million last quarter and $13.3 million this quarter.
In total they have 9 customers now including Walmart and their most recent addition, Southern Glazer’s, a large wine and spirits distributor. As they continue to scale their customer base is becoming more diverse.
They also stated they are working on the ability to remotely control the Symbots. They are fully autonomous, but say a bot gets stuck because something spilled or was in the way, they will be able to remotely control the bots from anywhere in the world and they stated no competitor possesses that capability. This is crucial because every minute that passes where there is a bottleneck and the distribution center is down, it is extremely costly for companies.
“We continue to feel like we are investing more in research and development than anybody else in supply chain technology. Not only that, but our R&D is extensively pointed at new product innovation, whereas our competition has to invest heavily in tact debt and just maintaining what they have.” - CEO Rick Cohen
Outlook
We are still very early as the company said currently they have capacity to move 400 million cases a year and are in the process of deploying the capacity to move another 1.6 billion cases annually.
Yet 500 billion cases are moved in the total U.S. addressable market alone each year. The Greenbox joint venture will help them penetrate the global market and they see a big opportunity in Europe. They expect Greenbox will contribute $500 million of high margin recurring revenue per year once installations are complete.
Their speed of deployments on the systems is improving. When they first became a public company the systems took 2 to 2.5 years to ramp to full usage. The systems they are rolling out now they expect to be done in under 22 months and their long term audacious goal is to get it all the way down to 6 months.
Their recurring revenue streams are already profitable and keep in mind that is coming from just 12 systems as only 12 of the total 47 system deployments they currently have are fully operational.
So if you were to only look at the systems they are already building, the recurring profits will only drastically increase, and this doesn’t account for all the new systems that seem inevitable as they continue to grow at a very fast pace and take on new customers. The partnership I mentioned in the last article, with Southern Glazer’s, will start to show up in 2024 and the Greenbox joint venture with Soft Bank is expected to announce its first customer in 2024 as well. Here are links to those articles:
“One of our basic tenants with Symbotic is the automation that we’re providing is so much more advanced than other automation out there. And our innovation pipeline is continuing to grow.” - CEO Rick Cohen
They believe they will sell a lot of small systems in the future, something I’ve discussed in previous articles. So far they’ve only dealt with huge customers like Walmart, but they believe catering to small customers will really expand their market. This could encompass both smaller companies that can’t afford the traditional system and/or companies that may only need part of a warehouse, so you could stick 10 small customers in the same warehouse.
It’s been interesting to see Symbotic cruise forward seemingly with little difficulty while so many other companies are seeing their revenue decline. They offered some color:
“I think what we’re seeing is, the customers that we have right now with Symbotic, want to go as fast as they can. They ultimately — we have great customers. They’re winning in their market spaces, and they want to — I think they see headwinds coming and they want to be at the forefront of lowering costs. And I think that’s what — so we’re not seeing any slowdown. If anything, people want to go faster.” - CEO Rick Cohen
There are a lot of tailwinds for warehouse automation as every dollar counts when it comes to these big box retailers trying to improve their bottom line.
What I’m Doing
This stock is a tricky one because if I look at it conservatively, it seems overvalued, it just went up 30% in a day, seasoned investors would say take the money and run.
Yet the company shows no sign of slowing down. Management continues to make comments along the lines that no other company in the world is able to do what Symbotic does to the same extent.
They remain in hyper growth mode while margins tick up and they seem to be moving closer each quarter to profitability.
I sold 2 covered calls at a $50 strike and collected $400 in premium. It seems every quarter there is a massive run up after the earnings call and then the stock slowly drops back down. This is what I’m banking on and would look to add more shares under $40.
Have a Happy Thanksgiving and I’ll be back with another article next week!