Symbotic stock is heavily shorted: is it a good contrarian buy?

Symbotic (SYM) stock short sellers have made a killing this year as its crash accelerated. After peaking at $64.25 in 2023, it has plunged by over 61% to the current $24.47, bringing its market cap from over $5.14 billion to the current $2.5 billion.

This price action has benefited its substantial short sellers because the company has one of the biggest short interest in Wall Street at 39%.

Symbotic is a big player in the warehouse industry

Symbotic has been one of the biggest beneficiaries of the e-commerce industry since it provides warehouse automation solutions. It offers these services to some of the biggest retailers in the US and other countries. 

Walmart, the world’s biggest retailer, has deployed its products in its warehouses and even taken a stake in the company. The other top clients are firms like Albertsons, Target, and C&S Wholesale solutions. 

These companies have been investing heavily in e-commerce to fend off competition from companies like Amazon and eBay. 

Symbotic’s key solution is its mobile robots, which use artificial intelligence and other technologies to automate most warehouse processes. The robots can travel up to 25 miles per hour. 

The company also develops software that helps to control its robots. Over the years, it has accumulated over 400 patents, which it hopes will help to give it an edge against its competitors. 

The challenge, however, is that the e-commerce industry has matured, meaning that the company’s growth will likely start falling in the coming years. 

Symbotic earnings 

SYM’s business has grown in the past few years, with its revenue rising from over $100 million in 2019 to over $1.17 billion in the last financial year. Analysts expect that this revenue growth will continue, albeit at a slower pace in the coming years.

The average revenue estimate for this year is $1.75 billion, followed by $2.39 billion in the next financial year. 

Additionally, Symbotic has improved its business as it advances towards profitability. It had a net loss of $104 million in 2019, which dropped to $23.9 million in the last financial year. Analysts expect that the earnings per share will turn positive this year, hitting 13 cents followed by 36 cents next year.

The most recent quarterly results showed that its revenues rose to $491 million from the previous $424 million. Its half-year revenue rose from $785 million in 2023 to $1.284 billion, meaning that its growth was continuing.

Symbotic generates most of its revenue selling its systems, followed by operations and software maintenance and support. 

The company also narrowed its total quarterly loss to $14.2 million from the previous $40.9 million. Its management expects its fourth-quarter revenue to be between $455 million and $475 million.

A key advantage for Symbotic is that it has a huge backlog of over $22.8 billion, meaning that there is still demand for its solutions. However, the backlog growth rate was relatively slow in the last quarter. 

The other advantage of the company is that its business is mostly made up of relationships, whereby customers like Walmart and Target will likely not go for its competitors. 

However, the two potential risks are that its revenue growth will slow down and its valuation is fairly stretched.

There is also a risk that the stock will come under pressure as the artificial intelligence industry slows. While Symbotic is primarily a robotic company, it is often seen as an AI stock like SoundHound and Nvidia.

Read more: Buy Symbotic Inc. stock to take your slice of the growing AI industry

Symbotic stock price analysis

SYM chart by TradingView

The daily chart shows that the SYM share price peaked at $64 in July 2023 and then retreated to a low of $17.28 in August. 

It formed a death cross pattern as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other on June 17. 

The stock has also moved below the key support level at $29.6, its lowest point in September 2023 and also the 61.8% Fibonacci Retracement level. 

Therefore, the stock’s path of least resistance is bearish as long as it is below the support at $29.62. The key catalyst that will determine its performance will be its earnings scheduled for November 11. 

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