Symbotic Trading AI fell 36% on Wednesday due to account errors. What should entrepreneurs do? | The Motley Fool

Limit of Example (SYM 12.90%)which makes artificial intelligence (AI) robots for warehouses, fell 35.9% on Wednesday in heavy trading.

Symbotic Products began trading in June 2022, when the Boston-area company went public through a merger with a special purpose acquisition company (SPAC). Walmart is the company’s biggest investor, and its biggest customer.

There’s a lot going on here, so let’s unpack it in small chunks.

What is the person behind the sell-off?

Investor pessimism led the company to issue early Wednesday a statement saying that on Nov. 25 he has discovered an accounting error, in addition to the version he presented on Nov. 18, when it prepares its 2024 annual financial report in Form. 10-K with the Securities and Exchange Commission (SEC). Fiscal 2024 ends on September 28 for the company.

Symbotic’s accounting error revealed on Nov. 18 when it reports its Q4 earnings impact period (between quarters in the fiscal year) and has no net impact on total earnings 2024, the company said at the time. But the newly discovered accounting errors – which occurred in the first report Q2, Q3 and Q4 – will affect several key metrics and its fiscal 2024 results are negative.

As a result of the new findings, Symbotic is delaying filing its annual report with the SEC because it has to return its fiscal results for the year 2024. Also, the newly discovered errors caused the management to lower its guidance for the first quarter of the 2025 budget.

When can investors expect the 2024 budget announcement?

Symbotic has 15 calendar days from its filing date for late filing with the SEC to file the annual report without penalty. This notification was issued on Nov.27, so the Symbotic extension passed Thursday, December 12.

What are the details of the 2024 refund?

Here’s what the company said it discovered on Nov.25:

Symbotic discovered an error in the recognition of revenue related to the amount of money that will not be paid in some deployments, which also affected the system revenue recognized in the second, third and fourth quarters of the fiscal year 2024. … The company estimating the total effect of correcting these errors would be to lower system revenue, system gross profit, income (loss) before income taxes, and adjusted EBITDA. [earnings before interest, taxes, depreciation, and amortization] from $30 million to $40 million for fiscal year 2024 compared to the financial results released on November 18, 2024.

By how much was Q1 guidance lowered?

The past is the past. For me, it is relevant that the company lowered its guidance for the current quarter: “Symbotic now expects revenues of $ 480 million to $ 500, and adjusted EBITDA of $ 12 million to $ 16 .”

The company did not include the original instructions in its release. That required me to remove the Nov. 18 to determine the degree of reduction in conductivity. The previous Q1 opinion was as follows:

• Earnings were $495 million to $515 million.
• Adjusted EBITDA of $27 million to $31 million.

Lowering mid-Q1 revenue guidance from $505 million to $490 million is not the case. However, cutting the median of adjusted EBITDA — the main profit metric — from $29 million to $14 — is a big deal. This is slightly more than a 50% discount.

Profitability metrics drive product value. Therefore, given the almost 52% haircut in the adjusted EBITDA guidance of Q1, it makes sense that investors brought Symbotic stock by 36% on Wednesday. In fact, it can be made that the decline in the stock could be worse, and in the ballpark of 52%.

Does Symbotic Accounting seem like a no-brainer?

Hypers traders and probably short sellers (those who make money when stock prices fall) are at full capacity on Wednesday talking about Symbotic stock on various financial and media sites. .

Some commentators feel that Symbotic’s marketing has gone too far, with accounting errors amounting to “no big deal.” Others say that the situation can become “other Super Micro Computer” (U.S The Department of Justice has reportedly launched an investigation into a computer server expert in September when a well-known marketer released a report alleging that accounting and other matters were being manipulated.)

My opinion, based on the available data, is that the Symbotic market is fair. But the available data doesn’t support the Supermicro comparison.

That said, until the company’s 10-K for fiscal 2024 is filed with the SEC, investors should remember that other important data may be forthcoming.

Until Symbotic files its 10-K for fiscal 2024, investors cannot make an informed investment decision about its stock. Therefore, long-term investors should not try to buy the stock until they can review the company’s 2024 fiscal results in the 10-K filing.

Symbotic products can be volatile for a while as day traders play with it.

Symbotic products are worth watching, but Nvidia products are the best way to invest in robotics

Use Symbiotic NvidiaThe graphics processing unit (GPU) in at least some of the AI ​​robots supports it. This is not surprising as Nvidia chips and related technologies are used for training and deploying autonomous machines of various types, including robots.

In fact, Nvidia products are the best way to invest in robotics, a market that has great growth potential, thanks in large part to recent advances in AI.