SYM

Is Symbotic Stock a Buy Now?

The arrival of artificial intelligence (AI) presents a variety of opportunities to invest in this secular trend. You can buy stock in the semiconductor manufacturers producing AI chips, and in the companies building AI software.

An intriguing investment choice among AI-related businesses is robotics company Symbotic (NASDAQ: SYM). It uses artificial intelligence to act as the brain for its machines, which are designed to streamline freight processing in warehouses.

Symbotic's stock price increased after the May 6 release of the company's earnings report for its fiscal second quarter, which ended March 30. This is a positive sign, but is it an indicator that now is the time to buy shares?

To get to an answer requires digging into the company in more detail. This can provide insight into Symbotic's solutions, and help you assess the company's potential as an AI investment for the long haul.

Symbotic's strengths

Symbotic's AI tech holds the kind of promise anticipated by the rise of artificial intelligence. The company strives to revolutionize the warehouse logistics business by employing AI to manage its robot workers.

Thanks to AI, Symbotic's automation systems can learn from the tasks performed, constantly improving operational efficiency. These systems contribute to getting products from warehouses to stores with speed and accuracy. Clients include Walmart, Albertsons, and Target.

The company continuously improves its technology. Its latest machines employ a new AI chip with greater computational power, enabling increased throughput and allowing a robot to recognize various package sizes, including damaged boxes. For example, the current model can "see" irregular-sized boxes that earlier robots couldn't handle.

Right now, Symbotic's business is in growth mode as it deploys its technology into each of the warehouses owned by customers. This is evident in its strong year-over-year revenue results.

The company notched sales of $424.3 million in its fiscal second quarter. That's nearly a 60% increase from the prior year's $266.9 million.

At the end of Q2, Symbotic had 18 systems fully implemented in customer warehouses with an additional 37 in progress. A year ago, the there were nine systems in full operation with 28 in progress.

To help accelerate its growth, Symbotic formed a joint venture with SoftBank called Greenbox last year. Greenbox recently signed its first customer. Symbotic anticipates seeing revenue from this deal in the third quarter.

Factors to consider

Despite its use of AI, Symbotic harbors risk as a long-term investment. While the company is rapidly expanding revenue, it's not profitable. Symbotic had a net loss of $41 million in its fiscal Q2.

That said, many tech companies prioritize business growth over profits. In addition, Symbotic is working toward achieving profitability. Its Q2 net loss improved over the prior year's loss of $55.4 million.

Another consideration is the length of time required to implement Symbotic's platform. Currently, it takes about two years to get its AI robots up and running at a location.

Contrast this with competitors, such as KION Group's Dematic, which can implement its automation system in 18 months or as little as 16 weeks for its micro-fulfillment system intended for smaller spaces.

Symbotic is working to reduce its implementation time frame. The company recently completed a deployment in 20 months.

This and its lower Q2 net loss are promising signs. The challenge is assessing whether they prove to be long-term trends. Since the company's initial public offering (IPO) occurred in 2022, its brief history as a public company provides scant information to evaluate its business performance over time.

Two technicians interact with an industrial robot.

Image source: Getty Images.

Making a decision about Symbotic stock

Symbotic's strong revenue growth, impressive customer list, and continual improvements in its robotic and AI technologies are compelling reasons to buy its stock.

But Symbotic's the upstart in an established industry. For instance, Dematic has been in business since 1819, and has implemented 6,000 systems compared to the 18 Symbotic has deployed so far.

Also, Symbotic's technology requires a substantial ongoing capital investment. Producing a robot army is not cheap. For instance, in fiscal Q2, the company's cost of goods sold totaled $380.1 million, a significant chunk of its $424.3 million in revenue.

Symbotic's AI tech promises innovation to disrupt the venerable warehouse logistics industry. But it's still a young company that has yet to prove it can become profitable in a capital-intensive environment. This makes the stock an investment idea only for those with a high risk tolerance.

Should you invest $1,000 in Symbotic right now?

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Robert Izquierdo has positions in Symbotic, Target, and Walmart. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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