I got this off Fidelity Site. Will this be a good buying op?
Intuitive investing
1:09 p.m. 02/06/2006 By Herb Greenberg Provided by
Also, crow-eating time? And Hoku on the hook
SAN DIEGO (MarketWatch) -- Despite reporting blowout numbers, Intuitive Surgical took a hit last week after mentioning on its conference call that sales would slip as customers delayed "purchasing decisions."
The knee-jerk slide of 8% to 10% (depending on the time of day, Friday) is yet another reminder what happens when stocks valued for invincibility in a "monkey see, monkey do" type market prove just how invincible they aren't.
Never mind that in this case the purchasing delay may be caused by a good thing: The company is rolling out a next-generation version of its Da Vinci surgery robot, which at around $1.5 million is about 50% more than its predecessor. That's a lot of money!
A delay today, however, could lead to a jump-starting of sales tomorrow or later in the year, which would then reinvigorate the momentum. I say "could" because hospitals have to decide whether the new Da Vinci is worth the hefty premium.
While it's good from a public relations standpoint for a hospital to say it has the latest and greatest, as in a surgical robot, the Da Vinci still hasn't proven overly popular among surgeons. On average, last quarter, the machine was used only 25 times per quarter per hospital, according to several analyst reports. That utilization rate is critical, because each procedure uses disposable instruments, which last quarter accounted for 29% of revenues.
That means the lion's share of growth came from machine sales, which could become vulnerable if prospective customers start weighing the importance of the machine for P.R. purposes over financial prudence and the reality of its use.
Put another way, unless the utilization rate shows a sharp bounce, any falloff in machine sales could take a big slice out of Intuitive's (ISRG) overall growth. My guess (and it's only a hunch) is that such a falloff won't happen this year, especially if the company gets a second-half surge from new sales. But when it does -- and it will, unless (perish the thought!) the expected second-half surge never happens, in which case all bets are off -- investors should treat the stock's recent jitters as a tame tease of what's to come. |
