Symbotic is Poised for Upside, Says Analyst

Stock Market

Shares of Symbotic (NASDAQ: SYM) have tanked 28.5% in the past month due to macroeconomic volatility. However, shares were up 20.7% on Tuesday to close at $14.36. Symbotic was listed on the NASDAQ in June this year through the Special Purpose Acquisition Company (SPAC) route.

The company is focused on transforming the supply chain when it comes to the transport of consumer goods through its “robotics and automation-based product movement technology platform.”

Symbotic has developed an end-to-end system that improves storage density, increases available stock-keeping units (SKUs), lowers product damage, and improves the speed at which goods reach the customers.

Walmart: the Largest Customer

The retailing giant Walmart (WMT) is not only the largest customer of SYM, making up 67% of its total revenues in FY21, but is also a stakeholder in Symbotic. According to Barron’s report, Walmart disclosed in a regulatory filing last month an 11.1% stake in SYM.

SYM has also secured a multi-year Master Supply Agreement (MSA) with WMT to implement its artificial intelligence (AI) based supply chain technology in 42 of WMT’s regional distribution centers.

According to Needham analyst James Ricchiuti, SYM’s MSA agreement with Walmart gives a “strong line of sight into revenue for the next several years.”

The top-rated analyst pointed out that while WMT represents a “significant portion” of its $11 billion multi-year revenue backlog at the end of May, SYM also has “supply relationships with other leading retailers, including Albertsons (ACI)”.

Strong TAM and a Robust Management Team

Ricchiuti believes that SYM’s customer base is likely to “broaden over the next 1-2 years as SYM slots in other customers in the general merchandise and grocery markets and other market verticals.”

The analyst is of the opinion that SYM’s “disruptive automation platform” has the potential to address a market worth $350 billion.

Ricchiuti is also positive about SYM’s management team, considering that Symbotic was founded by Rick Cohen, who “built C&S Wholesaler Grocers into the largest wholesale grocery business in the U.S.”

As a result, the analyst remains bullish on the stock with a Buy rating and anticipates that SYM could “deliver annual revenue growth of more than 65% over the next several years.”

The analyst has a price target of $18 on the stock, which is close to the Street’s high price target of $19 on the stock. Ricchiuti’s price target implies an upside potential of 25.4% at current levels.

Rest of the analysts on Wall Street are also upbeat about the stock with a Strong Buy consensus rating based on a unanimous eight Buys. The average SYM price target of $17.13 implies an upside potential of 19.3% at current levels.

Bottom Line

Symbotic’s disruptive automation platform could very well take the market by storm, judging from the strong Q2 results and Wall Street analysts’ bullish stance. SYM also scores an 8 out of 10 on the TipRanks Smart Score system, which indicates that the stock is highly likely to outperform the market.

The TipRanks Smart Score system is a data-driven, quantitative scoring system that analyses stocks on eight major parameters and comes up with a Smart Score ranging from 1 to 10. The higher the score, the more likely the stock will outperform the market.

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