Shares of Symbotic (NASDAQ: SYM), which makes artificial intelligence (AI)-enabled robots for warehouses, plunged 35.9% on Wednesday on extremely heavy trading volume.
Symbotic's stock began trading in June 2022, after the Boston area-based company went public via a reverse merger with a special purpose acquisition company (SPAC). Walmart is an investor in the company, as well as its largest customer.
There's a lot going on here, so let's unpack it in smaller bits.
What was the culprit behind the stock sell-off?
Investor pessimism was fueled by the company's early Wednesday release of a statement saying that on Nov. 25 it had discovered accounting errors, in addition to the type that it disclosed on Nov. 18, while it was preparing its fiscal 2024 annual report filing on Form 10-K with the Securities and Exchange Commission (SEC). Fiscal 2024 ended on Sept. 28 for the company.
The accounting errors that Symbotic had disclosed on Nov. 18 when it reported its fiscal Q4 results were timing-related (between quarters within the fiscal year) and had no net impact on overall fiscal 2024 results, the company said at the time. But the newly discovered accounting errors -- which occurred in the initial Q2, Q3, and Q4 reports -- will negatively affect several key metrics in its fiscal 2024 results.
Due to the new discovery, Symbotic is delaying filing its annual report with the SEC because it will be restating its fiscal 2024 results. Moreover, the newly found errors led management to lower its guidance for the first quarter of fiscal 2025.
When can investors expect the fiscal 2024 annual report to be filed?
Symbotic has 15 calendar days from the date of its notification of late filing with the SEC to file its annual report without incurring penalties. The ntification was submitted on Nov. 27, so Symbotic's extension last through Thursday, Dec. 12.
What are the specifics regarding the fiscal 2024 restatement?
Here is the issue the company said it discovered on Nov. 25:
Symbotic identified errors in its revenue recognition related to cost overruns that will not be billable on certain deployments, which additionally impacted system revenue recognized in the second, third, and fourth quarters of fiscal year 2024. ... The company estimates the total impact of correcting these errors will be to lower system revenue, system gross profit, income (loss) before income tax, and adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] by $30 million to $40 million for fiscal year 2024 compared to the financial results released on November 18, 2024.
How much was Q1 guidance lowered?
The past is the past. To me, it's more concerning 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 million to $16 million."
The company did not include the prior guidance in its release. That required me to have to pull up its Nov. 18 document in order to determine the degree of the guidance cuts. The prior Q1 outlook was as follows:
- Revenue of $495 million to $515 million.
- Adjusted EBITDA of $27 million to $31 million.
Lowering the midpoint of the Q1 revenue guidance from $505 million to $490 million is not that concerning. However, chopping the midpoint of the outlook for adjusted EBITDA -- a key profitability metric -- from $29 million to $14 million -- is a big deal. This is slightly more than a 50% cut.
Profitability metrics drive stock valuations. So given the nearly 52% haircut in the Q1 adjusted EBITDA guidance, it makes good sense that investors drove Symbotic stock down by 36% on Wednesday. Indeed, a case could be made that the decline in the stock could have been worse, and in the ballpark of 52%.
Do Symbotic's accounting issues seem to be no big deal?
The stock hypers and presumably the short-sellers (those who make money when a stock's price declines) were out in full force on Wednesday making comments about Symbotic stock on various financial and social media sites.
Some commenters were opining that Symbotic stock's sell-off was overdone, with the accounting errors amounting to "no big deal." Others were saying that the situation could turn into "another Super Micro Computer." (The U.S. Department of Justice reportedly began a probe of the computer server specialist in September after a well-known short-seller released a report alleging accounting manipulation and other concerning issues.)
My opinion, based on the available data, is that Symbotic stock's sell-off was deserved. But the available data does not support a comparison to Supermicro.
That said, until the company's 10-K for fiscal 2024 is filed with the SEC, investors should remember that additional relevant data could be forthcoming.
Until Symbotic files its 10-K for fiscal 2024, investors cannot make informed investing decisions about its stock. So, long-term investors should not be tempted to buy the stock until they are able to review the company's official fiscal 2024 results on the 10-K filing.
Symbotic stock could be very volatile for a while as day traders play tug-of-war with it.
Symbotic stock is worth watching, but Nvidia stock is the best way to invest in robotics
Symbotic uses Nvidia's graphics processing unit (GPU) chips in at least some of its AI-powered robots. This isn't surprising as Nvidia's chips and related technology are being used for training and deploying autonomous machines of various types, including robots.
Indeed, Nvidia stock is the best way to invest in robotics, a market that has significant growth potential, thanks largely to recent advances in 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
