On Wednesday, Symbotic Inc. (NASDAQ:SYM) shares faced a downgrade from DA Davidson from Buy to Neutral, with a revised price target set to $35.
The downgrade follows the company's announcement that it has delayed its annual 10K filing for the fiscal year ending September 28, 2024, due to the need for additional time to assess the financial impacts of previously disclosed errors in system revenue recognition. These errors also affect the company's internal control over financial reporting.
Symbotic revealed on November 25th that it had identified additional errors in revenue recognition related to cost overruns on certain deployments. These errors are expected to negatively impact the fiscal year 2024 results, including sales, gross profit, earnings before taxes, and adjusted EBITDA by an estimated $30-$40 million.
Furthermore, the company has adjusted its first-quarter 2025 revenue and adjusted EBITDA projections downward by $15 million each at the midpoint.
The company's need to correct these errors and evaluate their impact on financial reporting has led to the decision to adjust the stock's rating. This reassessment of Symbotic's financial health and the associated challenges in internal controls have contributed to a more cautious outlook from analysts.
Investors are now eyeing the company's next steps as it works through these accounting issues. The firm's downgrade reflects a wait-and-see approach as Symbotic addresses its internal financial reporting processes. The market's response to this news will be closely monitored by stakeholders and industry observers alike.
In other recent news, Symbotic Inc. experienced a notable rise in their stock price targets from various firms, following strong earnings and revenue results. TD Cowen, Deutsche Bank (ETR:DBKGn), and KeyBanc all increased their price targets to $50, $50, $45, and $48 respectively, maintaining positive ratings on the stock.
The firms recognized Symbotic's achievements in project management and recent wins, as well as their robust financial results. In the fourth quarter, Symbotic reported a 55% year-over-year increase in revenue, reaching $577 million, and closed the fiscal year with $1.8 billion in revenue.
The company's recent strategic actions, such as the partnership with Walmart (NYSE:WMT) Mexico and the initiation of construction on a second GreenBox facility in Georgia, have also been highlighted. Despite a decrease in the company's backlog due to macroeconomic changes, the partnership with Walmart Mexico is expected to add approximately $400 million to the backlog.
Symbotic anticipates a 40% year-over-year increase for the first quarter of 2025, supported by the acquisition of Veo Robotics. These are recent developments that could be of interest to investors.
InvestingPro Insights
Despite the recent downgrade and accounting challenges, Symbotic Inc. (NASDAQ:SYM) shows some promising financial indicators according to InvestingPro data. The company's revenue growth remains strong, with a 54.84% increase over the last twelve months as of Q4 2024. This aligns with the InvestingPro Tip that analysts anticipate sales growth in the current year.
However, the company's profitability remains a concern. An InvestingPro Tip notes that Symbotic was not profitable over the last twelve months, which is reflected in its negative operating income of -$49.23 million for the same period. This financial situation underscores the importance of the ongoing revenue recognition corrections and their potential impact on the company's bottom line.
Interestingly, despite these challenges, Symbotic has shown strong market performance recently. InvestingPro data reveals a 74.81% price total return over the last three months, indicating investor optimism. This aligns with another InvestingPro Tip highlighting the stock's strong return over the last three months.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Symbotic, providing a deeper understanding of the company's financial health and market position.
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