Needham has adjusted its price target for Symbotic Inc. (NASDAQ: NASDAQ:SYM), a robotics automation solutions company, to $40.00, down from the previous target of $54.00.
Despite the reduced target, the firm maintained a Buy rating on the stock.
Symbotic's revenue for the third fiscal quarter of 2024 surpassed expectations, showing a 58% increase year over year, which was above the company's guidance and 6% higher than the consensus. However, the company's adjusted EBITDA fell short of expectations due to weaker System gross margins, which were affected by prolonged construction schedules and rising costs.
The company has forecasted growth for the fourth fiscal quarter of 2024 to be between 16% and 21% year over year, which is notably lower than the consensus estimate of a 32% increase. Additionally, the projected adjusted EBITDA at the midpoint is 23% below consensus. In response to the issues contributing to the gross margin shortfall, Symbotic is taking steps to address the Engineering, Procurement, and Construction (EPC) challenges by internalizing these functions.
Management at Symbotic anticipates a recovery in gross margins by the fourth quarter and expects further expansion in the first fiscal quarter as the deployment of systems picks up pace, the analyst pointed out.
Symbotic reported a 58% year-over-year increase in third-quarter revenue, reaching $492 million. Despite facing margin pressures due to construction delays and increased labor costs, the company is shifting to internal operations for better control and efficiency.
TD Cowen, despite reducing Symbotic's price target to $43.00 from $55.00, maintained a positive long-term outlook on the company by reiterating its Buy rating on the stock, suggesting that the fundamentals of the company remain strong.
Symbotic also anticipates a short-term slowdown in revenue growth, but projects a reacceleration of revenue growth in the first quarter of fiscal 2025. For the fourth quarter, Symbotic's financial outlook estimates revenue between $455 million and $475 million, with adjusted EBITDA of $28 million to $32 million.
InvestingPro Insights
Amidst the adjustments in Symbotic Inc.'s (NASDAQ:SYM) financial outlook, InvestingPro metrics indicate a company with a significant market capitalization of $20.83 billion USD, yet it is facing profitability challenges with a negative P/E ratio of -180.29. The revenue growth remains a bright spot, with an impressive increase of 67.55% over the last twelve months as of Q2 2024. This aligns with the company's recent report of a 58% increase in revenue for the third fiscal quarter of 2024, surpassing expectations.
Two InvestingPro Tips that may be of interest to investors considering Symbotic's stock are that analysts anticipate sales growth in the current year and that the company is expected to become profitable this year. These insights suggest potential for future financial improvement, despite recent margin pressures. Moreover, there are 7 additional tips listed in InvestingPro that could provide further depth to an investor's research.
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