Increasing Protectionism And Onshoring Will Diminish Warehouse Relevance

Key Takeaways

• Global trade barriers and shifting customer logistics models threaten AutoStore's revenue growth and market expansion.
  
• Heavy dependence on a narrow client base and intensified competition risk rapid revenue drops and margin erosion.
  
• Strong recurring revenue, repeat customers, innovation, and geographic diversification drive sustainable growth, cash flow visibility, and maintain a competitive advantage for AutoStore.

Catalysts

Provides robotic and software technology in Norway, Germany, Europe, the United States, Asia, and internationally.

• Increasing global protectionism and trade barriers are likely to restrict AutoStore's access to critical markets and supply chains, resulting in higher input costs and limited international expansion. Over the long term, this will dampen revenue growth and may pressure margins due to increasing costs in procurement and market entry.
  
• As customers shift towards onshoring, local manufacturing, and decentralized, eco-friendly logistics models, the demand for automated, centralized warehouse solutions is set to decline, materially constraining AutoStore's long-term addressable market and posing a sustained threat to top-line growth.
  
• AutoStore's overreliance on a concentrated customer base, especially in sectors such as e-commerce and 3PL, heightens revenue risk; any reduction in spend, insourcing of automation by major clients, or failure to broaden its customer mix could cause sharp revenue declines and higher earnings volatility.
  
• Intensifying competition from large technology firms and agile robotics start-ups is accelerating commoditization in the warehouse automation sector, which will likely diminish AutoStore's technological edge, force price reductions, and erode both future revenue growth rates and sustainably high gross margins.
  
• The rapid evolution of AI-driven and more flexible supply chain solutions threatens to make static, automated storage systems less relevant, increasing the risk of product obsolescence, slower software/services uptake, and ultimately undermining future recurring revenue streams and earnings power.

AutoStore Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on AutoStore Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming AutoStore Holdings's revenue will grow by 2.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 15.1% today to 22.5% in 3 years time.
• The bearish analysts expect earnings to reach $129.4 million (and earnings per share of $0.04) by about August 2028, up from $79.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 16.4x on those 2028 earnings, down from 36.1x today. This future PE is lower than the current PE for the NO Machinery industry at 36.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.6%, as per the Simply Wall St company report.

AutoStore Holdings Future Earnings Per Share Growth

Risks

• The accelerating adoption of e-commerce and automation across logistics and retail sectors is driving sustained, long-term demand for AutoStore's technology, which supports top-line revenue growth and increases the size of the addressable market.
  
• A significant and growing base of recurring revenue streams from AutoStore-as-a-Service and software offerings is increasing visibility and stability in future cash flows, supporting healthy EBITDA margins and long-term earnings.
  
• The company's strong installed base of 1,200 unique customers and high rate of repeat purchases-evidenced by 60% of revenue from existing customers-reduces customer concentration risk and provides reliable opportunities for revenue expansion over time.
  
• Continued investment in innovation, with ten new product launches in the last twelve months and further software and platform enhancements planned, is maintaining AutoStore's competitive edge, which is likely to support robust gross margins and profitability.
  
• Strengthening performance in large growth markets such as North America, supported by improved order intake and stabilization after tariff-related uncertainty, positions AutoStore to benefit from geographic diversification and supports long-term revenue and earnings growth.

Valuation

• The assumed bearish price target for AutoStore Holdings is NOK5.2, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of AutoStore Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK15.16, and the most bearish reporting a price target of just NOK5.2.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $576.3 million, earnings will come to $129.4 million, and it would be trading on a PE ratio of 16.4x, assuming you use a discount rate of 7.6%.
• Given the current share price of NOK8.8, the bearish analyst price target of NOK5.2 is 69.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.