Symbotic (NASDAQ: SYM), a maker of artificial intelligence-powered warehouse automation robots, went public two years ago through a merger with a special purpose acquisition company (SPAC). The company’s stock has seen some wild fluctuations, but as of this writing, it has nearly quadrupled from an opening price of $10.54 to roughly $40.
Symbotic attracted a lot of attention for three reasons: it was growing rapidly, its biggest backer and customer was Walmart, and it claimed that a $50 million investment in one of its modules (which included warehouse robots and automation software) could save the company $250 million over 25 years.
A person accepts a delivery from a delivery robot from Serve Robotics.
Image credit: Serve Robotics.
The company’s revenue has already grown at a compound annual growth rate (CAGR) of 116% from fiscal 2021 to fiscal 2023 (which ended last September), and analysts expect it to continue to grow at a CAGR of 44% from fiscal 2023 to fiscal 2026. But with a market cap of $23 billion, Symbotic may have less room for upside compared to other smaller robotics companies.
So does Serve Robotics (NASDAQ: SERV), a much smaller robotics specialist with a market cap of $350 million, have a chance to replicate Symbotic’s impressive gains over the next few years?
What does Serve Robotics do?
Serve Robotics makes autonomous, AI-powered sidewalk delivery robots. The company was originally founded in 2017 as a division of Postmates, a food delivery company that was acquired by Uber in 2020. Uber spun off Serve Robotics as an independent company in 2021, but the company continues to use its robots to fulfill deliveries for Uber Eats in select cities.
Saab Robotics completed a reverse merger with blank check company Patricia Acquisition Corp. in 2023, paving the way for it to go public on April 18, 2024 at $4, but initially garnered little attention from retail investors. It opened at $4.75 a share on its first day, closed at $3.11, and fell below $3 by the end of the month.
Why didn’t Serve Robotics stock prices rise initially?
Bulls were not impressed because the company was still small, projecting sales of just $107,819 and $207,545 in 2022 and 2023, respectively, and analysts expect the company to post $1.6 million in sales this year as it expands.
That’s an upbeat outlook, but much of that growth is priced into the company’s stock price, which trades at roughly 220 times this year’s sales. The company also forecasts net losses of $21.9 million in 2022 and $24.8 million in 2023, with analysts forecasting a net loss of $28.6 million in 2024.
Serve operates about 100 robots, but only 39 were in operation daily in the first quarter of 2024. The company primarily serves Uber Eats restaurants in the Los Angeles area and has no plans to add any new robots this year. However, in 2025, it aims to deploy up to 2,000 robots for Uber Eats across the U.S. Based on these projections, analysts believe the company could narrow its net loss to $20.2 million and generate revenue of $16 million in 2025.
If Saab Robotics can achieve this ambitious goal, its stock price will be more reasonably valued (though not cheap). Analysts also think the company could finally achieve profitability in 2026, generating $60 million in revenue, assuming the company can scale up production without burning through cash. That could be very tough for a company that had just $34.2 million in cash and cash equivalents as of the end of April.
But Nvidia believes in Serve Robotics
While Serve Robotics is still a speculative investment, Nvidia seems bullish on the company’s growth potential: In a recent filing with the Securities and Exchange Commission on July 18, the AI chipmaker revealed it was taking a 10% stake in the company. Investor optimism has seen Serve Robotics’ shares rise nearly 260% since the announcement.
But this isn’t a huge investment for Nvidia; the company has made similar investments in other AI-related companies over the past year. Plus, the idea of using autonomous delivery robots for last-mile delivery has never been tested on a national scale, and unforeseen problems like traffic accidents, theft and vandalism could easily kill the experimental market. Symbotic doesn’t have to worry too much about those issues in its warehouses and fulfillment centers.
Could Serve Robotics be the next Symbotic?
While both Serve and Symbotic are looking to replace human workers with automated robots, I believe the former will experience more growing pains than the latter. I think Serve is an interesting investment for speculative investors, but it shouldn’t be seriously compared to Symbotic until it starts to scale production at a sustainable rate.
Should you invest $1,000 in Serve Robotics right now?
Before buying Serve Robotics shares, consider the following:
The analyst team at Motley Fool Stock Advisor has identified 10 stocks that investors should buy right now, and Serve Robotics isn’t among them. The 10 selected stocks have the potential to generate big gains over the next few years.
Consider the date when Nvidia made this list: April 15, 2005… If you had invested $1,000 at the time of recommendation, you would have made $692,784!*
Stock Advisor gives investors an easy-to-follow blueprint for success, with portfolio construction guidance, regular updates from analysts, and two new stock picks every month. The Stock Advisor service has more than quadrupled S&P 500 returns since 2002*.
View 10 stocks »
*Stock Advisor returns as of July 22, 2024
Leo Sun has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Nvidia, Uber Technologies, and Walmart. The Motley Fool has a disclosure policy.
