Symbotic Stock Surges 134.5% YTD: Should You Buy Now or Wait?

Driven by the artificial intelligence or AI frenzy, shares of Symbotic SYM have performed exceptionally well so far this year, soaring 134.5%. On a year-to-date basis, SYM shares have performed much better than its industry and industry peers, Coherent Corp. COHR and MediaAlpha MAX. Coherent Corp. gained 21.9%, while MediaAlpha declined 6.8% in the same period.

Given SYM’s impressive rally, investors might wonder if the opportunity to add this high-flying stock to their portfolio has passed or still exists. To answer the question, let’s delve deep as far as SYM stock is concerned.

Factors Working in favor of SYM

Technical indicators suggest continued strong performance for SYM. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in SYM’s prospects.

50-Day Moving Average Data of SYM Stock

Image Source: Zacks Investment Research

Symbiotic’s high backlog positions it to generate substantial revenues in the foreseeable future. We are optimistic about its margin expansion, driven by increased system deployment. Furthermore, a high free cash flow and a favorable current ratio hint at high liquidity, attracting investor attention.

In the third quarter of fiscal 2025, results of which were released on Aug. 6, the company had $22.4 billion in backlog. Management stated that the company expects to recognize nearly 11% of its remaining performance obligations as revenues in the next 12 months, 56% of its remaining performance obligations as revenues in the following 13-60 months, and the rest thereafter.

Revenues increased 26% year over year. We expect the top line to be driven, going forward as well, by converting this sizable backlog. For the fourth quarter of fiscal 2025, Symbotic expects revenues in the $590-$610 million range, and adjusted EBITDA in the $45-$49 million band. The improvement in deployment efficiency is likely to fuel revenues and margins going forward as well.

Apart from boosting revenues, faster deployment times imply that Symbotic is executing installations more smoothly compared to its historical averages, suggesting that labor hours per project are decreasing. This also suggests that rework incidents are declining

Headwinds that cannot be ignored

SYM’s earnings surprise history is not impressive. In the four trailing quarters, it surpassed the Zacks Consensus Estimate twice and missed in the other two, with an average negative surprise of 78.3%.

Symbotic  Price and EPS Surprise

Symbotic price-eps-surprise | Symbotic Quote

SYM stock is not so cheap, as its Value Score of F suggests a stretched valuation at this moment.

In terms of the forward price-to-sales ratio, SYM is trading at 12.09X, higher than its industry and fellow industry players Coherent Corp and MediaAlpha. Coherent Corp. and MediaAlpha have a Value Score of D and A, respectively.

SYM’s partnership with Walmart WMT has been very profitable, accounting for a significant portion of the former’s revenues. Walmart is the largest customer of SYM. While we do not anticipate any threat soon, since Walmart has invested in Symbiotic, investors should be cautious about customer concentration risks. Additionally, Symbiotic currently does not pay dividends and has no plans to do so, which weakens its appeal for income-focused investors.

Final Verdict

Symbiotic’s high backlog positions it to generate substantial revenues in the foreseeable future. We are optimistic about its margin expansion, driven by increased system deployment. Despite these tailwinds, challenges like high valuation and customer concentration risks make us believe that it is still not an opportune time to buy this Zacks Rank #3 (Hold) stock.

Investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research