Deja Vu: Intuitive Surgical Back to 2005 Levels

Buy and hold investing has simply been obliterated in the U.S. the past decade. I found Intuitive Surgical (ISRG) in 2005 and started buying it in the $40s area, eventually unloading my stake in the $90-$110 range. It jumped to around $130 in early 2006 before going sideways for a year... then it began another monster run from $100 to $350 in under a year (2007)

Now after Wednesda's warning, the stock is back to levels I sold out at in latter 2005. Anyone who bought in that period and was "patient" enough to hold for the entire ride is now down. Not good. This chart only goes back 3 years but you get the idea...

Gosh, we sold this name in July @ $265 - today it hit $100.


There have been worries about a slowdown in financing due to the "big ticket" nature of their robotic devices, and it appears what this rumor that had been hanging around the stock finally came to fruition.

Remember what we've been saying for weeks - this earnings season will be marked by (a) complete lack of visibility and (b) pulled guidance by companies as the economic turmoil rolls on.

• "At this point, we believe that uncertainty in global economic markets will make forecasting system placements (robot sales) difficult in 2009."

Earnings

• Intuitive Surgical Inc. released preliminary fourth-quarter sales figures Wednesday that were below Wall Street targets, and the stock fell by a double-digit percentage in extended trading.
• The maker of surgical instruments and accessories said sales for the December quarter rose 22 percent to $232 million. Analysts surveyed by Thomson Reuters expected $255.1 million, on average.

The numbers for the quarter, taken aside from analyst estimates were still "very good" - sales up 46%

• The company's preliminary figure for full-year sales, $875 million, marked a 46 percent increase over 2007 but again fell short of analysts' forecast of $898.1 million.

But Wall Street is all about "beating a number" - not running a solid business. Looks like they are throwing out a 15% revenue growth for 2009 but aren't we all just guessing?

• Intuitive said revenue would grow about 15 percent this year, which would be about $1.01 billion. Analysts were looking for $1.11 billion in 2009.

• "We believe that this drastic miss, along with the economy, will likely cause investors to lose confidence," said Lazard Capital Markets analyst Dr. Sean Lavin, in a note to investors. "While expectations for 2009 have now been reset, we believe Intuitive will need to meet expectations for two -- or more likely three or four -- consecutive quarters before the stock may rally."

At some price here this stock becomes attractive - but anything with such a high price tag I find threatening in this environment unless the U.S. government is paying for it - they will pay any price since they don't care about budgets.

[July 28: Barron's Cover Story on Intuitive Surgical]

Disclosure: No position

Comments

[athena:]

HIFU is coming. Who would want surgery when you can have HIFU at a fraction of the cost and no side effects? The whole world is using it and we will too when FDA gets off their rumps. It is so funny to see other countries blow past our technologies so often and we all still think we are number 1.

Jan 09 08:20 AM

[Camden:]

athena,

This company is NOT threatened by HIFU. HIFU has very limited application. You say the "whole world is using it." Got any figures on the numbers of installed systems? I think you'll find it is quite low. The greater threat IRSG is likely to come from the drug industry.

Jan 09 11:17 AM

[athena:]

Camden,

Prostate cancer is more common than breast cancer.
Hifu prostate removal is noninvasive, without the side effects of surgery.
It is now offered in Canada and throughout Europe and Asia. US citizens are already going to Canada in growing numbers for this application. It will be offered for other cancers eventually. It is the way of the future, and is much cheaper procedure than ISRG. Drugs will take their toll on ISRG also.

Jan 09 12:15 PM

[PauvrePapillon:]

Not everyone is putting off capital equipment purchases. Some are moving ahead to acquire state-of-the-art technologies even if they have to cut back in other areas.. Here is one hospital CEO with her priorities in order. Of course, it does help that CyberKnife Centers open with a backlog and are immediately profitable for their operators.

Hospital puts off building renovations to buy CyberKnife

Margaret Sabin, chief executive officer at Penrose-St. Francis Health Centers, said, “We are buying a new CyberKnife program for the cancer center. We decided that that program directly benefited patients — it is state of the art technology. But to do it, we had to put off some building renovations. We decided to focus on health care and patient needs — the rest we’ll make do without.”

www.csbj.com/story.cfm...

Jan 09 12:38 PM

[borisb:]

Looks like the robot is only cracking the mass market of one surgical procedure, where as there was hope the robot might dominate a handful of surgical procedures. Also the average selling price of the instrument sets has abruptly declined. When the fire of momentum burns out, all thats left is ash.

Jan 16 12:44 PM

[rmiers1:]

the ceo has stated they are NOT discounting anything....listen to the conference calls, Are you a paid basher for the cyber knife vs surgury?

Mar 03 03:10 AM