This big AI/robotics play attracted Walmart and Softbank, but not Cathy Wood. It is up 200 % and can go much higher

The shares are up more than 400 % since going public in summer 2022 (October 15, 2023). They are up nearly 200 % since a year ago. And still, you ain't seen nothing yet, I think. Symbotic (SYM), a global leader in AI-based warehouse automation technology, may well be one of the biggest growth stories around, especially since announcing GreenBox, a $500B+ opportunity joint venture with Softbank that brings Symbotic's technology platform to a Warehouse-as-a-Service level with plenty of recurring revenue.

Financial results, forecasts, and recent deals

Symbotic posted revenue of $312 million, a net loss of $39 million, and an adjusted EBITDA loss of $3 million for the third quarter of fiscal 2023. In the same quarter of fiscal 2022, Symbotic had revenue of $176 million, a net loss of $33 million, and an adjusted EBITDA loss of $22 million. Cash, cash equivalents, restricted cash, and marketable securities on hand increased by $48 million from the prior quarter of 2023 to $513 million at the end of the third quarter.

A new systems sales contract with GreenBox increased the contracted backlog to approximately $23 billion. For the fourth quarter of fiscal 2023, Symbotic expects revenue of $290 million to $310 million and an adjusted EBITDA of $0 million to $3 million.

Symbotic recently secured several high-profile deals, including a partnership with Walmart Inc. (WMT) to retrofit all 42 regional distribution centers with Symbotic systems over the next 8+ years. Collaborations with Associated Food Stores and United Natural Foods, Inc. (UNFI) highlight the technology's potential in integrating advanced AI-powered robotics and automation technology into distribution centers, enhancing supply management, improving efficiency, and facilitating growth.

Wall Street analysts expect Symbotic to turn profitable in FY 2024, with the company's EPS expected to hit 24 cents. This expectation seems reasonable given that the company's losses have shrunk with its expanding scale. For the June quarter, Symbotic reported a net loss of $4.3 million on revenue of $312 million.

Smart warehousing and the integration of AI

Smart warehousing, often called Automated Supply Chain Management (ASCM), leverages advanced technologies and software to optimize the movement of goods and services from suppliers to customers. The integration of AI has accelerated progress in supply chain automation, with leading manufacturers in warehouse automation experiencing revenue growth ranging between 15% to 20% annually since 2014, according to a McKinsey report. The adoption rate for advanced robotics in warehousing and automation technologies in the supply chain remains high with increasing use cases.

While Amazon has long been the dominant force in the retail industry, one reason being its extensive network of fulfillment centers worldwide, localized warehousing is becoming the gold standard for achieving fast delivery. Warehouse-as-a-service (WAAS) and 3rd party logistics (3PL) offerings have become viable strategies for companies to remain competitive without the need to own and operate fulfillment centers.

Most companies do not possess Amazon's vast resources and infrastructure. Labor scarcity is a big challenge. Workforce training time, high turnover rates, and the need for digital upskilling top the concerns for supply chain managers. The impending labor shortage in manufacturing and a skills gap will result in substantial costs in the US, reaching $1 trillion in 2030 and leaving 2.1 million jobs unfilled. This industry landscape has boosted the demand for automation technology, which is expected to reach a market size of $31.71 billion by 2030 and grow at a compounded annual growth rate of 11.5% between 2022 and 2030.

This is where Symbotic comes into play through its WaaS solutions. Symbotic is well-positioned to help companies navigate the evolving supply chain management landscape, offering a competitive edge in a rapidly changing industry.

Symbotic solidified its ascend as a winner in the supply chain automation sector, achieving record revenue and operating margins amid the booming interest in AI-enabled robotics technology for the supply chain. Symbotic stock has lost some momentum since reporting Q3 earnings, with its stock crashing from highs of over $60 to around $40 today.

Risks

Symbotic bears point to the one-time revenue nature of large parts of the core Symbotic business.

They further point to the dependency on Walmart and that the deal with Walmart will exclude the company from doing business with Amazon.

Furthermore, the company is richly valued, as shown by the price/sales ratio in the company profile below.

The bull case

Bulls point to the GreenBox joint venture with Softbank, highlighting its recurrent revenue aspect and huge TAM lifting Symbotic to the next business level.

Rick Cohen, Chairman of Symbotic, said during the Q3 earnings call:

Greenbox

GreenBox targets the lucrative warehouse-as-a-service market, which presents a $500 billion annual opportunity. By offering cost-effective solutions to small and medium-sized businesses, it aims to capture significant value through system contracts and recurring revenue streams.

The GreenBox venture is set to order Symbotic's systems over six years, starting in fiscal year 2024, which will substantially expand the reach of Symbotic's AI and automation technology.

With this strategic venture, the company aims to keep Symbotic as a pure-play entity and allow GreenBox to serve as a commercial sales force that facilitates seamless operations while catering to diverse customer needs.

Adding approximately $11 billion to the backlog from the GreenBox venture further solidifies Symbotics' growth prospects. Even in the unlikely scenario where no systems are ordered, the company anticipates positive cash flow, backed by SoftBank, ensuring shareholder protection.

With GreenBox's potential for solid returns, Symbotic expects its 35% interest in the GreenBox subscription business to generate a robust cash flow stream.

Actionable advice

I suggest buying Symbotic on any meaningful dip. We expect the shares to rise considerably during the next three years. This applies to long-term investors and short-term traders alike. Symbotic is a very high beta stock with elevated volatility. The short ratio is high.

The stock offers very high option premiums. Conservative investors may enter a first position by either selling cash-covered puts or embarking on a covered call strategy.

Please feel free to DM me if you want additional information on how best to trade the stock or other hypergrowth stocks I recommend buying.