Spotlight: AI + Robotics = 4x Growth

Google. Apple. Amazon. Microsoft. They are all investing in AI but one company you probably have not heard about is Symbiotic, a warehousing automation firm that combines advanced robotics with artificial intelligence.

It’s one of those businesses that’s hard to wrap your head around at first but it’s been a huge hit on Wall Street. Following a SPAC merger a few years ago, prior to which the company was generating less than $15 million in quarterly revenue, management has led the company to deliver massive sales growth that most recently eclipsed $1.1 billion for the past year.

That pace of sales growth doesn’t go unnoticed among analysts and investors, and indeed it has translated to a stunning year for shareholders as SYM share price climbed by an astonishing 333%.

Now that the stock has already gone up so much, is there still more gas in the tank to fuel hire prices? Or is all the good news baked into the price?

Key Points

• Despite its share price rising by over 4x this year, a cash flows analysis still projects upside of close to 50%.
• Symbiotic’s investment appeal hinges on sustained and rapid revenue growth.
• The company’s share price is highly volatile to massive swings should be expected.

Analysts Are Still Bullish

In spite of the stunning pace of sales increases from one quarter to the next over the past three years, analysts still see upside potential for Symbiotic, especially after this week’s near 9% pullback in price.

The consensus on Wall Street puts fair value at close to $55 per share, but we think that may be underestimating the reality of what’s to come over the next few years.

With over $250 million in cash in the bank and growing sales frequently by triple digit percentage amounts from one quarter to the next, a cash flows analysis suggests Symbiotic could hit the mid-$70s before its intrinsic value is eclipsed.

Is Symbiotic a Buy?

While top line sales have been stunning, it must be emphasized that the company has failed to report a profit over the past 12 months and operating losses are stacking up.

As a result, the traditional metrics of valuation, such as P/E ratios, are essentially rendered useless. One that we can eye closely is price-to-sales, which is now around 4x, a lofty figure but certainly not at the extreme end of the spectrum.

One way to think about that number is if sales grow by 100% over the next two years, that P/S ratio would then be just 0.5x, representing a virtual steal.

Is such a high figure reasonable, though? In 2020, growth was 173%, 2021 135% and 2022 98.4%. It seems that the pace of growth is slowing and so perhaps a double each year is optimistic, but even if the numbers are 75% and 50%, the forward-looking 2-year price-to-sales would make the stock seem cheap now.

For those who can tolerate big price swings, Symbiotic has the potential to outperform in the next few years in a grandiose way. But equally, it’s a stock that’s been known to get a 50% haircut in the space of a few months so it’s certainly not for the faint of heart.