Giant growth potential: the warehouse automation revolution
Warehouse automation is no longer science fiction, but a reality that is fundamentally changing the face of supply chains. Companies around the world are looking for ways to optimize their processes and respond to the growing demand in e-commerce. Robotics and AI-based systems that not only streamline operations but also reduce costs and errors are becoming a key success factor in logistics.
One of the pioneers in this sector is a technology firm that manages warehouses for leading market players such as Walmart and Target with its automated system. Its revenue grew 57.7% to $492 million in the third quarter of fiscal 2024, and its technology remains one of the most in-demand solutions in logistics.
Company introduction
Symbotic $SYM+0.1% is an American technology company that specializes in automating and optimizing warehouse and logistics processes. Its innovative approach combines robotics, artificial intelligence and sophisticated software platforms to fundamentally change the way companies manage their supply chains. Symbotic's main product is an automated warehouse system that uses autonomous robots to handle pallets and individual products, sorting, storing and preparing them for distribution. This technology eliminates the need for manual labour, minimises errors and significantly increases efficiency, delivering significant cost savings.
Symbotic operates primarily in North America, where its technology is used by leading retail chains, logistics companies and distribution centers. Major clients include Walmart and Albertsonswho have achieved significant improvements in the efficiency of their operations with Symbotic solutions. In recent years, the company has been looking to expand into other regions and industries, with its technology becoming increasingly popular in the context of growing demand for fast and efficient logistics in the e-commerce sector.
One of the main factors that makes Symbotic interesting is its ability to adapt its technology to different types of warehouse and logistics operations. Its systems are designed to integrate into existing warehouses without the need for extensive building modifications, allowing for flexible solutions and easy adaptation to the specific needs of individual customers. Emphasis on sustainability and minimising environmental impact is another key aspect, with Symbotic's technologies optimising energy consumption, reducing waste and minimising space requirements.
Symbotic was founded in 2007 by Rick Cohen, who wanted to bring revolutionary changes to supply chain management. The company's initial focus on developing automation technologies quickly gained the attention of key players in the market. A significant milestone in the company's history was its collaboration with Walmart, which helped solidify its position in the market and paved the way for further opportunities. In 2022, the company went public through a merger with SPAC, an investment company, which allowed it to raise the capital needed for further development and expansion.
Why is the company interesting?
Symbotic Inc.
SYMRobo-firms are no longer limited to theoretical concepts, but are quickly becoming key players in transforming industries around the world. With increasing technological advancements in artificial intelligence (AI), the adoption of robotics is growing in various sectors such as manufacturing, healthcare, logistics and retail. Companies like Symbotic, which specializes in AI-driven robotic systems, have the potential to significantly impact the global economy by improving supply chain and warehouse management.
Symbotic, known for its advanced robotic systems, has seen its stock rise an impressive 329% in 2023, with shares down 55.7% this year. Still, Wall Street believes the stock could rise 88.9% in the next 12 months. In the wake of the COVID-19 pandemic and the rise of e-commerce, automation has become a key element in ensuring supply chains run smoothly.
An important partner of Symbotic is Walmart, which has invested in the technology and acquired an 11% stake in the company. Symbotic has installed its systems in 42 of Walmart's distribution centers, aiming to reduce costs and increase efficiency. Other customers include Target, Albertsons and others. In the third quarter of fiscal 2024, Symbotic's total revenue grew 57.7% to $492 million, with growth lower than the previous two quarters. The company expects revenue to increase in the first quarter of fiscal 2025 due to an improved process for deploying new systems.
Symbotic currently has 21 fully functional systems and its $22.8 billion in orders indicate strong demand for its technology. Despite strong revenue growth, the company is still struggling to achieve profitability, with its third-quarter net loss per share of $0.02, better than the previous year. The recent acquisition of Veo Robotics, which brings a new 3D depth-sensing system, should also improve productivity.
Analysts expect Symbotic's revenue to grow 49.3% to $1.7 billion in 2024 and for the company to report earnings of $0.18 per share. In 2025, earnings are expected to rise to $0.46 per share. Wall Street has a generally positive outlook on Symbotic stock, with a target price of $42.93, suggesting a possible upside of more than 80% over the next year. With the global warehouse automation market expected to grow 16.2% annually through 2029, Symbotic is well positioned to capitalize on this opportunity.
How was the last quarter?
In the third quarter of fiscal year 2024, which ended June 29, 2024, Symbotic saw a significant increase in revenue to $492 million, a substantial improvement from $312 million in the same quarter the previous year. Although the company reported a net loss of $14 million, this loss is down from $39 million in the prior year. This also means that the company is slowly and surely approaching profitability. Adjusted EBITDA was $15 million, which is a turnaround from the adjusted EBITDA loss of $3 million that the company recorded in the same quarter last year.
Symbotic has focused on innovation and advanced technology improvements in the last quarter. For example, SymBot's capability was expanded with an improved sensor and the development of a mini-bot for BreakPack was advanced. The company also continued to deploy 39 systems, contributing to record revenue for the quarter. However, systems gross margin fell below expectations due to extended build times and higher implementation costs. The company is now focusing on improving planning, implementation speed and project management to improve its performance.
Although the deployment of five new systems was initiated and three operating systems were completed in the quarter, Symbotic plans that improvements in the deployment process may temporarily slow revenue growth. However, system costs are expected to decline and gross margin is expected to return to historical levels in the upcoming quarter.
For the fourth quarter of fiscal 2024, Symbotic expects revenue in the range of $455 million to $475 million and adjusted EBITDA between $28 million and $32 million. The company continues to strive to improve its processes and planning, which should contribute to future growth and stability.
Results for recent years
Symbotic has undergone significant changes in its financial results in recent years, illustrating its journey from significant losses to progressively improving performance.
We start with revenues, which have shown impressive growth. While revenues reached just US$92 million in 2020, they rose to US$251 million in 2021 and then to US$593 million in 2022. This positive trend continued in 2023, when revenues reached US$1.1 billion. This growth indicates that the company is expanding its market share and increasing its business activities.
Cost of sales grew in proportion to sales, which is common for growing companies. In 2020, the cost was $111 million and increased to $241 million in 2021. Costs increased to $493 million in 2022 and to just under $1 billion in 2023. This increase in costs, while consistent with the increase in sales, suggests possible efficiency issues or increased costs to expand the business.
Operating profit and net income remain negative, but we see gradual improvement in both. The company is generally expected to reach net profit by the end of 2024.
What's in store for the company?
It's likely to be a big favor from Walmart. About a month ago, it was announced that Walmart plans to spend more than $200 million on self-driving forklifts as part of a broader effort to automate more warehouse operations.
The world's largest retail chain wants autonomous forklifts to transport pallets of merchandise in its distribution centers that complement Walmart stores.
Symbotic also bought the assets of Veo Robotics for $8.7 million. The acquisition, which closed on July 19, 2024, includes Veo's FreeMove® 3D depth-sensing computer vision system for industrial work cells and related intellectual property. By integrating FreeMove into its warehouse automation system, Symbotic aims to increase productivity and safety in human-robot collaboration environments.
Analyst expectations
Based on 13 Wall Street analysts who have offered 12-month price targets for Symbotic over the past 3 months. The average target price is $44.45 with a high forecast of $60.00 and a low forecast of $10.00.
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