Why Symbotic Fell Hard Today, Even After Good Results

Source Motley_fool

Key Points

  • Symbotic beat revenue estimates but disappointed on the bottom line.

  • Management said supply and scheduling issues around its new warehouse product could slow revenue in the near future.

  • That isn't a big deal for long-term investors, but the stock is pretty expensive today.

  • 10 stocks we like better than Symbotic ›

Shares of warehouse automation specialist Symbotic (NASDAQ: SYM) fell 15.7% on Thursday as of 1 p.m. ET.

Symbotic reported earnings last night that were actually fairly good. However, the company also unveiled its next-generation storage product, which management noted could lead to some delays or lumpiness in recognized revenue in the near future.

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Symbotic sees profit-taking after a big run

It should be noted that Symbotic's stock had an incredible run heading into earnings, with the stock up 124% on the year. So, one might understandably chalk today's action up to profit-taking on a less-than-perfect quarter.

Revenue came in stronger than expectations at $592.2 million, up 25.9% on the year, while net loss per share of $0.05 missed expectations by $0.04. Still, as a growth company, investors are likely more focused on the top-line trajectory than bottom-line profits at this point.

And here is where the problem may lie, if one can call it that. For the upcoming fiscal fourth quarter, Symbotic only guided for between $590 million and $610 million in revenue -- basically very little sequential growth, if any at all.

But management gave a "good" reason for the revenue hiccup. In conjunction with earnings, the company unveiled its next-generation storage technology system, which offers increased storage capacity, faster case handling, and better fire suppression. With the new system just now commercially available, management noted: "With the launch of a proprietary new storage structure, we expect a temporary short-term impact on revenue based on schedules shifting to accommodate. Importantly, the new structure does not affect our backlog and supports our long-term value creation."

Packages on the conveyor belt in a warehouse.

Image source: Getty Images.

Symbotic is an interesting physical AI play, but expensive

Symbotic is a leader in next-generation warehouse automation, and the company is clearly executing well. A near-term slowdown due to supply constraints of its next-generation product isn't a big deal.

However, valuation may be an issue after this year's huge run. Shares trade at over 14 times this year's revenue estimate and over 223 times this year's adjusted earnings estimates. So today, Symbotic is an interesting stock to watch, but too expensive for this investor's liking.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Symbotic. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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