Symbotic: A Fast-Growing Supply Chain Automation Company

seekingalpha2023-07-03

onurdongel Investment Thesis Symbotic (NASDAQ:SYM) has been one of the best-performing companies this year, already up nearly 290% amid the booming enthusiasm around AI (artificial intelligence). The ...

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The ...</p>\n\n<a href=\"https://seekingalpha.com/article/4614853-symbotic-stock-fast-growing-supply-chain-automation-company-buy\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0149725797.USD","symbol_name":"汇丰美国股市经济规模基金","start_time":0,"source_url":"https://seekingalpha.com/article/4614853-symbotic-stock-fast-growing-supply-chain-automation-company-buy","article_id":"2348921569","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1353561607/image_1353561607.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2348921569","pubTimestamp":1688360272,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"onurdongel Investment Thesis Symbotic  has been one of the best-performing companies this year, already up nearly 290% amid the booming enthusiasm around AI . 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The company has a sophisticated end-to-end automated warehouse system that is well-positioned to benefit from the rapid expansion of the logistics automation market. Despite the recent rally, the current valuation remains attractive and should present ample upside potential. Data by YCharts Why Symbotic? Symbotic is a Massachusetts-based technology company that specializes in supply chain automation. It provides an end-to-end automated warehouse system that comprises both hardware and software. The hardware includes vision-enabled autonomous robots (e.g. mobile robots and robotic arms) that induct, store and retrieve products within a specific structure. The software is responsible for routing, sequencing, planning, and orchestrating these robots to make them work cohesively together. Symbotic's system currently owns over 490 patents (existing and pending) and has multiple competitive advantages. For instance, its unique storage structure maximizes inventory density and capacity, which enables a 30% to 60% reduction in warehouse footprint. Its robots are also equipped with machine-learning capabilities, which allow them to improve and optimize their performance over time. The vision and sensing capability of its robots also increases the accuracy and reliability of their decision. The system's strong capabilities convert to great ROI (return on investment) for customers. According to a company, $50 million spent on the system can result in savings of $250 million across its lifetime (~25 years), with outbound efficiency improving by 5x to 9x. This helped the company land multiple blue-chip customers including Walmart (WMT), Target (TGT), and Albertsons (ACI). The company currently only serves US groceries and general merchandise companies, and a potential expansion into other verticals and locations should substantially increase its growth opportunities. Symbotic Huge Market Opportunity Logistics automation presents a huge and fast-growing market opportunity. According to Precedence Research, its market size is forecasted to grow from $52.6 billion in 2021 to $162.5 billion in 2030, representing an excellent CAGR (compounded annual growth rate) of 13.2%. Symbotic is even more optimistic and expects its serviceable addressable market to potentially reach over $400 billion in the future. The market continues to expand rapidly due to the rise of the commerce industry, especially around e-commerce and omnichannel commerce (e.g. buy online pickup in-store). The increasing retail channels vastly increase the complexity of companies' logistic processes. While the system's initial setup is expensive, there are multiple long-term benefits. Automation allows the company to increase operating efficiency, reduce headcount, and lower costs all at the same time. For instance, South Korean e-commerce giant Coupang (CPNG) has been leveraging automation robots in its fulfillment centers, which plays a key to its path to profitability. I believe logistics automation is an inevitable trend that will continue to be a priority investment area for retail companies. Symbotic Attractive Valuation Despite the 250% rise in share price this year, Symbotic's valuation is still attractive in my opinion, especially when considering its growth. The company is currently trading at an EV/sales ratio of 2.4x, which is cheap compared to other warehouse automation companies including Zebra Technologies (ZBRA) and Berkshire Grey (BGRY), as shown in the first chart below (I am using EV/sales as the company is still not profitable yet). The two companies have an average EV/sales ratio of 3.8x, which represents a substantial premium of 58% above Symbotic. The huge valuation gap seems unjustified as the company's exponential revenue growth of 177% in the latest quarter is also much higher than peers, as shown in the second chart below. Data by YChartsData by YCharts Risks and Concerns Profitability is a notable concern in my opinion, as Symbotic is still nowhere near breakeven, currently with a net loss margin of (20)%. Due to its product nature, costs are extremely heavy at the start of the contract, as the company has to put everything in place. The annual software subscription and potential upsell afterward are where the profit will likely come from, as the incremental costs for these products are minimal. According to the company, its gross margin increases by 60% across the lifetime of the system. This poses a risk as the company will struggle to generate a profit if it cannot expand its relationship with existing customers or reach a large enough scale. Customer concentration is another minor risk, as the company currently relies heavily on only a handful of high-paying customers (predominantly Walmart). The hefty price tag of its system also pushes away many smaller potential customers, which makes diversifying its customer base much harder. Investors Takeaway  Symbotic is a great company with huge potential in my opinion. The company has an advanced warehouse automation system that demonstrates strong competitive advantages and value propositions. It should also benefit meaningfully from the market's rapid expansion, as the popularity of e-commerce and omnichannel commerce continues to grow. The current price also seems discounted considering its prospects and growth. I believe the company should have further room to run and I rate it as a buy.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2348921569"}