Berkshire Grey (BGRY) is the only warehouse robotics company listed and have been hammered by the market.
Analyzing it the tailwinds and headwinds.
The silver line is that $BGRY – Berkshire Grey is is making the robots and the AI sofware for Walmart, Target, Fedex and others to keep up with the boom in e-commerce and the supply chain bottle necks.
There are almost 19,000 warehouse facilities in the United States, and it is these facilities that represent a critical link in the commerce supply chain. Over 80% of them rely on human work only with no automation, 15% us seom automation, while 5% are automated.
There is a huge shortage of staff in the warehouse industry is US. The warehouse and transportation industry had a record 490,000 openings in July 2023, a gap that experts predicted will widen in coming months.
All this 3 factors are creating a market that is screaming for help.
How BGRY is helping?
BGRY robots are making all kind of tasks from piking, sorting, packing or smart shelf replenish in regular retail shops. They have a flexible suit of solutions and AI based sofware that can replicate “robot work experience” and can import skills as needed. Walmart $WMT, Fedex $FDX, Target $TGT, Bells, Atos and others are starting to use their solutions.
Why BGRY is the main protagonist in this market?
a. Is the only pure play stock in warehouse logistics. The means faster access to capital generaying faster growth.
b. Has the best list of customers that are switching to automatisation to keep up with the new realities: Walmart, Fedx, Target, Bells, Atos etc.
c. Has one of the best teams to ride this wave with 2 names that you should remember:
CEO Tom Wagner is the former CTO from IROBOT leading the tech efforts in the critical years of growth that made IRBT the company that is today (and also made some investors very happy).
Chief Scientist – Matt Mason – former director of the Robotics Institute at Carnegie Mellon where he supervised all the activities of the Robotics Institute and the National Robotics Engineering Consortium (NREC). Supervised R&D projects for Walmart, ABB, Kuka, etc., and US technology organizations such as the Army, DARPA, the National Science Foundation, and the Office of Naval Research.
d. The AI Entreprise Software is a much ore tasty cookie in all this mix. While selling robots is a good busines to be now, the AI cloud with integrated skils for robots will be a market of its own. BGRY as pioneer in this field is building right now years of robot training and skills ready to deploy anywhere in the world.
Why BGRY is so cheap right now?
Problem: The sophistication of Berkshire Grey’s system means that right now only the big companies can access those technologies.
Solution: While the workforce is getting more expensive and harder to find, warehouse robotics will be adopted by more and more companies while he pioneers in automatisation will speed up the transformation.
Problem: BGRY orders are relatively small for the moment
Solution: The industry is changing but the speed up has just started. The orders are increasing at an impressive speed and most of them as reccuring orders (like that 25 M order from a 36 M order in October 2023. Last earnings has shown a revenue of $18.8 million in the third quarter of 2023, an increase of $16.6 million or 750% from the third quarter of 2020 and an increase of $14.3 million or 317% from the second quarter of 2023.
Total backlog (as nov 2023) was 113M in total (de be delivered some in 2023 and some 2023), a 20+% increase from the last quarter only.
Revenue growth is set 99% CAGR and judging by the numbers recorded this year, this doesn’t seem so difficult.
Problem: BGRY is not profitable and an rate hike will make them pay more for the capital needed for growth.
Solution: The brake even if projected for next year – pretty much when the interest rate hike is expected by the most howkish at the Fed. Also they had some 200M + in cash in NOv. 2023> So cash wise they are pretty much safe and able to grow.
Why not waiting until BGRY will prove itself and have meaningful EBITDA?
The initial valuation of 2B this summer was not that attractive as they had to show some numbers first. Now, after very promising earnings and new contracts ad partnerships, we have a 1.2B EV on the table.
Current EV/E2025EBITDA gives us a 5.2 result. With a conservative 12 EV/EBITDA multiplier Berkshire Grey’s EV would be ~ 2.77B or $13.8/share, more than double from current price.
Brooks Automation, Inc. (BRKS) an established robotics & automation company for example, a ev/ebitda over 100 right now.
The growth projected by BGRY didn’t factor in 3 important cathlysts: The wage increase in many sectors (warehouses included), the staff shortage and the supply chain bottle necks. The market might speed up to automatisation a lot sooner than expected any spark can get BGRY for a rally.
E-grocery and e-comerce has not slowed significantly during the re-opening and the growth trend is here to stay for years to come.
Fed gov has money and the political will to finance solutions for fixing the supply chain. Automation maight just be one of those solutions.
Amazon already bought Kinva (2012) and Canvas (2019) robotic and automation companies. Amazon is a trend setter and big players outhere might just put a bid on the table for BGRY and the price will fly an never comeback.
Finally – we might have noticed in the news that some countries are closing borders and there is a new spike in infectins across the globe. The winter ahead wil make all the cathalysts mentioned above even more critical. If the new variant(s) prove to be just as deadly as Delta, all e-grocery/e-commerce and robotics will see a renewed interest.
And you already know that $BGRY is riding a huge wave.
This article was written by u/invest_opinions.
