UBS is betting that Symbotic, a little known supply chain automation company, can benefit as more companies adopt its technology to mitigate labor and inflation pressures. Analyst Chris Snyder initiated coverage of Symbotic on Monday with buy rating and a price target of $17. That target implies upside of 30% from Friday’s close. Snyder said the company is poised to disrupt a $250 billion market while having a large enough backlog that provides a cushion for risk. He also said Symbotic is on track for a 60% compound annual growth rate and in the “line of sight” for revenue growth of about 500% in the coming years. “Our thesis has been strengthened on outsized inflation and the general choppiness of the post-Covid recovery,” Snyder wrote. “This already attractive growth market [automation] has been accelerated by the pandemic & heightened focus on building resiliency.” Supply chains around the world were brought to their breaking points due to the Covid outbreak, leaving companies unable to meet surging demand. Supply chain issues have also contributed to inflationary pressures seen around the globe. In the U.S. alone, inflation is running near its fastest pace in four decades. Because of this, Snyder thinks more companies will increase automation efforts, thus boosting Symbotic’s business and stock. “Historically, Automation investment has compressed in a downturn; however, we think the trend could bifurcate in the current cycle as the downturn is being driven by inflation, labor availability, supply chain disruption & difficult to manage inventory levels – all of which automation can help offset,” he said. — CNBC’s Michael Bloom contributed reporting.
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