It was reported by TheStreet.com this morning that Wachovia has downgraded Intuitive Surgical (NASDAQ: ISRG) to Market Perform. "Stock looks fully valued, as 2008 estimates may fall short of consensus expectations." As I type away, ISRG is trading around $290 per share down 20% from its 52 week high of $359.59.
When I was considering my Chasing Value: Final list -- 8 stocks for 2008, I had considered ISRG but then posted Chasing Value: Intuitive Surgical on the 2008 watch list instead, thinking that ISRG was not a bargain. I am surprised, then, that Wachovia was not joined by many other calls for patience and a watchful eye regarding putting new money into this stock.
The trailing P/E on ISRG currently stands at 94, while the forward P/E is 66. However, that is based on some speculation about the company's future earnings and does not allow any margin of safety. I am watching ISRG closely because I do want to own more.
Since the right time to buy involves market timing and stock-value guess-work, I will probably wait for the stock to drop further (if it does) and buy a portion of the amount of shares I want to own. If the stock goes up, I'll have a profit, and if it goes down, I will buy more and dollar cost average into the decline with new money.
I do not know where the stock might find support on the down side. However, if I was to take a wild guess from following the company almost since the IPO, I would think it would be hard to buy it under $250 per share. If my best guess is close, then I would be a buyer somewhere between $260 to $270, and only with long-term money. If you are looking for quick buck, I have nothing to say except good luck.
UPDATE: ISRG closed down $28.25, or 9.4 percent, to $271.73
DISCLOSURE: I own shares of ISRG
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. Find more posts by Sheldon here.
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