00:00 This is one of the best performing stocks on the market right now.
00:03 Symbotic ticker symbol SYM uses robots to automate warehouse supply chains.
00:09 The stock jumped 50% after earnings last week and its up 500% since it came to the market
00:15 via a SPAC last year. At the current share price the company has a valuation of $28 billion.
00:20 It's got $500 million of cash and investments and no debt so the enterprise value is $27.3 billion.
00:28 Symbotic's technology sounds futuristic and its revenue growth is equally impressive.
00:33 Revenue in the latest quarter surged by 78% to $312 million taking the 12 month total to
00:39 over $1 billion and that's 10 times more than it produced in 2019. However the company is not
00:45 profitable. Net income over the last 12 months is -$216 million with $149 million of stock based
00:52 compensation. Free cash flow however is positive at $107 million. Symbotic's autonomous robots can
00:59 travel up to 25 miles per hour and are controlled by AI. This technology addresses three fundamental
01:06 problems for companies. One, it reduces the need for warehouse workers such as forklift drivers
01:11 thus saving on labor costs. Two, it helps companies more quickly adapt their warehousing strategies
01:17 and three, it better suits the huge increase in individual items of stock known as SKUs.
01:23 This is a huge market and Symbotic already has relationships with large customers such as Walmart,
01:28 Albertsons, Target and Giant Tiger. Plus a joint venture with Softbank means the company can begin
01:34 to adapt the technology for smaller customers as well. All that said this is now an extremely
01:40 expensive stock trading at 27 times revenue and a high short interest indicates that not everyone
01:46 is so bullish on the business. Bears claim that Symbotic's technology is not as advanced as the
01:51 company makes out and they cite a number of competitors such as Ocado, Dymatic, AutoStore
01:58 and Kiva Systems which was bought by Amazon. Company insiders have also been huge sellers
02:03 of the stock and at much lower prices. But one of the biggest problems for Symbotic is the company's
02:08 low gross margins, right now only 16%. Let's assume a scenario where the company can grow
02:13 revenue 50% next year, 45% in year 2, 40% in year 3, 35% in year 4 and 30% in year 5. That would put
02:23 revenues at 5.5 billion in 5 years time and if Symbotic can get to 15% net income margins it
02:30 would be producing 820 million of net income. A 35 times multiple would then give the company a
02:36 valuation of 28.7 billion dollars but that's less than 1% above the current market cap. So Symbotic
02:44 stock looks pretty overvalued right now. But that said I wouldn't want to bet against such a fast
02:49 growing business so I give the stock a neutral rating. But these are my personal opinions not
02:54 financial advice and I've got no position in the stock. For more detailed investing ideas
02:59 make sure to visit our website overlookedalpha.com
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