Keith White's Leadership Will Drive Market Expansion Through New Products

Key Takeaways

• Leadership changes and strategic positioning in growing markets like e-commerce aim to boost long-term revenue and modernize customer engagement.
  
• Focus on OpEx-based deals and product innovation could improve revenue predictability, market reach, and gross margins despite economic challenges.
  
• Macroeconomic challenges, uncertain project deliveries, and potential U.S. tariffs pose revenue and margin risks, while a shift to OpEx deals may affect cash flow stability.

Catalysts

A robotic and software technology company, provides warehouse automation solutions in Norway, Germany, rest of Europe, the United States, Asia, and internationally.

• AutoStore's leadership change with the appointment of Keith White as Chief Commercial Officer, who brings extensive experience in transforming business strategies within tech giants, aims to drive market awareness and modernize customer engagement, potentially enhancing revenue growth.
  
• The company is strategically positioned in an underpenetrated market with expected growth driven by secular trends like e-commerce adoption and warehouse automation, which could boost long-term revenue.
  
• AutoStore's development of OpEx-based deals presents a new revenue stream that could improve the predictability and stability of future cash flows and revenues.
  
• The company's solid pipeline and market share gains amidst a challenging macroeconomic environment suggest promising potential for future revenue growth once market conditions stabilize.
  
• Investment in product innovation, with upcoming software and hardware announcements, supports an expansion of AutoStore's market reach, which could positively impact future revenue and gross margins.

AutoStore Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AutoStore Holdings's revenue will grow by 8.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 22.7% today to 24.7% in 3 years time.
• Analysts expect earnings to reach $186.6 million (and earnings per share of $0.06) by about March 2028, up from $136.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $211 million in earnings, and the most bearish expecting $155 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.3x on those 2028 earnings, up from 25.6x today. This future PE is greater than the current PE for the NO Machinery industry at 20.0x.
• 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 7.22%, as per the Simply Wall St company report.

AutoStore Holdings Future Earnings Per Share Growth

Risks

• Macroeconomic headwinds, high interest rates, and slowing e-commerce growth in 2024 led to market contraction, which could continue to impact AutoStore’s revenue growth if these conditions persist.
  
• Extended customer decision-making cycles in an unpredictable market environment may delay revenue recognition and challenge consistent earnings.
  
• Despite a strong backlog, the timing of project delivery remains unpredictable, leading to potential revenue fluctuations and lumpy cash flow.
  
• Uncertainties in the U.S. market, compounded by potential tariff announcements, could negatively impact revenue and margins, especially since North America accounted for 25% of revenue.
  
• A shift toward OpEx-based deals may increase recurring revenue but could reduce short-term revenue recognition, impacting cash flow and financial stability if not managed correctly.

Valuation

• The analysts have a consensus price target of NOK12.977 for AutoStore Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK16.35, and the most bearish reporting a price target of just NOK8.8.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $756.7 million, earnings will come to $186.6 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 7.2%.
• Given the current share price of NOK11.0, the analyst price target of NOK12.98 is 15.2% higher.
• 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.