Shares of Symbiotic(NASDAQ: SYM)which makes artificial intelligence (AI)-enabled warehouse robots, sank 35.9% on Wednesday in the heaviest trading session.
Symbotic’s stock began trading in June 2022, after the Boston-area company went public through a repeated merger with a special purpose acquisition company (SPAC). Walmart he is the investor in the company, as well as its biggest customer.
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There’s a lot going on here, so let’s break it down into bite-sized pieces.
Investor pessimism was fueled by the company’s early disclosure on Wednesday that in Nov. 25 had found accounting errors, in addition to the type it reported on November 18, when it was preparing the 2024 annual report on the Form. 10-K with the Securities and Exchange Commission (SEC). Fiscal 2024 ended on Sept. 28 of the company.
The accounting errors revealed by Symbotic on Nov. 18 when it reported its Q4 financial results were seasonal (between segments within a fiscal year) and had no net effect on total revenue for 2024, the company said at the time. But the recently discovered accounting errors – which occurred in the first Q2, Q3, and Q4 reports – will affect several important metrics in its financial 2024.
Due to the new acquisition, Symbotic is delaying filing its annual report with the SEC because it will be restating its 2024 financial results. Also, recently discovered errors have led management to lower its guidance for the first quarter of fiscal 2025.
Symbotic has 15 calendar days from the date of its late filing notice with the SEC to file its annual report without incurring penalties. The announcement was sent on November 27, so Symbotic extension until Thursday, December 12.
Here’s the story the company said it found in Nov. 25:
Symbotic has identified errors in its revenue recognition related to rising costs that are not paid on certain shipments, which further impacted system revenue recognized in the second, third, and fourth quarters of the 2024 fiscal year. … to correct these errors will be to reduce system revenue, system gross profit, income (loss) before tax, and adjusted EBITDA. [earnings before interest, taxes, depreciation, and amortization] and $30 million to $40 million in fiscal year 2024 compared to financial results released on November 18, 2024.
The past is the past. For me, it’s about the fact that the company lowered its guidance for the current quarter: “Symbotic now expects revenue of $480 million to $500 million, and adjusted EBITDA of $12 to $16 million.”
The company did not include initial guidance in its release. It required me to download its November 18th document in order to see the degree of management cuts. The first impressions for Q1 were as follows:
Lowering mid-Q1 revenue guidance from $550 million to $490 million isn’t all that concerning. However, cutting the median estimate of adjusted EBITDA – a key profit metric – from $29 million to $14 million – is a major undertaking. This is less than 50% of the cut.
Profitability metrics drive stock valuation. So given the nearly 52% cut in Q1 adjusted EBITDA guidance, it makes sense that investors sent Symbotic stock down 36% on Wednesday. Of course, the case can be made that the decrease in income would have been too much, and in the box of 52%.
The stock hypers and potential short-sellers (those who make money when the stock price drops) were full on Wednesday talking about Symbotic stock on various financial and social media platforms.
Some commentators have been of the opinion that the sale of Symbotic stock has passed, with accounting errors “no big deal.” Others said that the situation could change to “one Super Micro Computer.” (US The Department of Justice is said to have launched an investigation into the computer server expert in September after a well-known short trader published a report that accounting manipulations and other related issues.)
My opinion, based on the available data, is that the Symbotic stock trade was due. But the available data does not support the comparison with Supermicro.
However, until the company’s 2024 financial 10-K is filed with the SEC, investors should keep in mind that more relevant data may come.
Until Symbotic files its 10-K financial statements in 2024, investors cannot make informed investment decisions about its stock. Therefore, long-term investors should not be tempted to buy the stock until they can review the company’s official 2024 financial results on the 10-K file.
Symbotic stock can be negative for a while as day traders play tug-of-war with it.
Symbotic uses Nvidia‘s graphics processing unit (GPU) chips in almost all AI-powered robots. This is not surprising since Nvidia’s chips and related technology are being used to train and deploy autonomous machines of various kinds, including robots.
Indeed, Nvidia stock is the best way to invest in robots, a market with great potential for growth, thanks a lot to the advancement of AI.
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Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Walmart. The Motley Fool has a disclosure policy.
AI Stock Symbotic Plunged 36% Wednesday Due to Accounting Mistakes. What Should Investors Do? first published by The Motley Fool
