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Why Symbotic Stock Is Skyrocketing Today

Source The Motley Fool

Symbotic (NASDAQ: SYM) stock is seeing huge gains in Thursday's trading. The automation and robotics company's share price was up 20.7% as of 2 p.m. ET and had been up as much as 24.6% earlier in the daily session.

Symbotic stock is rocketing higher today following news that the company will purchase Walmart's robotics division. Symbotic will pay at least $200 million to acquire the unit, and the deal's announcement coincides with an expansion of the partnership between the two companies.

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Symbotic stock surges on Walmart robotics deal

Walmart is already Symbotic's largest customer, and selling its robotics division to the tech specialist signals that the relationship between the companies is getting even stronger. In addition to the initial $200 million purchase price, Symbotic could wind up paying an additional $350 million to the retail giant but stands to receive even more in related payments from the company.

In conjunction with selling its own robotics unit, Walmart plans to purchase systems for 400 accelerated-pickup-and-delivery centers (APDs) over a multiyear period. Providing the initial sale of the robotics division goes through, Walmart will actually pay Symbotic a total of $520 million, with $230 million of that sum paid upon the closing of the deal.

What comes next for Symbotic?

Symbotic's deal with Walmart is a positive development on multiple levels. The robotics specialist stands to immediately generate more revenue than its initial purchasing price to acquire the segment, and it signals that its most important business relationship is only getting stronger.

Crucially, the sale of the unit seems to remove the possibility that Walmart will attempt to develop its own automation and robotics systems to replace the ones it purchases from Symbotic. Given that sales to Walmart account for the large majority of its revenues, this is a very favorable development for Symbotic. With the retail titan likely to pursue massive automation initiatives over the next decade, the smaller robotics specialist has a promising growth outlook.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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