Well today I lost some cash, at least 'on paper.' And if I believe what I read in the business news it is because of the comments of a single analyst. Now that's power. It has to make you wonder. Intuitive Surgical (NASDAQ: ISRG), one of my biggest holdings, finished the day at $244.30 down $33.27. OUCH!
Shares of medical device maker Intuitive Surgical Inc. fell sharply Tuesday as an Oppenheimer & Co. analyst said the company's strong growth will slow in 2008 on fewer U.S. sales of the da Vinci surgical system, due to market saturation and a lack of adoption by gynecologists for hysterectomy procedures.
Analyst Amit Hazan said Intuitive Surgical is the most expensive stock in the medical technology sector, a value driven by both the company's robust growth rates and by results consistently beating Wall Street expectations by wide margins. He is correct that ISRG is expensive. Even after todays losses it still is trading at a P/E ratio of about 80.
This is only one analyst, and while he and most other analysts still think ISRG will report earnings that beat Wall Street estimates, traders were taking no chances and bailed out in a hurry. I hope the Fed still has that much power in swaying the market (to the positive) when they share their thoughts tomorrow.
I am not convinced that ISRG will have a disappointing year, and Mr. Hazan has not shared what he thinks the value proposition is on this stock, just that it is over valued. I did previously express some reservations when the stock was trading much higher but now I will be following it closely because there may be opportunity here.
I do not hold much favor with technical analysis, but looking at the charts it is noteworthy that it broke the $250 dollar level, which using the proper lingo 'looked like a point of resistance.' It is trading up slightly after hours.
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Disclosure: I own shares of ISRG
To find potential opportunities and verify my track record read Chasing Value or Serious Money.
Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm.
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Reader Comments (Page 1 of 1)
1-29-2008 @ 8:00PM
John Bohay said...
You have to protect your long positions with puts, especially in this choppy market, and especially with a high Beta stock like ISRG! I have taken a $2000.00 profit on two February 260 PUTS. Instead of holding a long position with a $2400.00 paper loss, it is only a $400.00 paper loss!
1-29-2008 @ 8:55PM
Charles Stevens said...
ISRG is one of the most unique companies available today to small investors like me. While it has a high P/E, the price of this stock is only relevant if Q4 operating results are less than Q3. However, all measures available to me as a retired financial analyst suggest strongly that Q4 will be at or better than Q3, primarily because the da Vinci operating machine has no competition. I bought more ISRG today.
1-30-2008 @ 6:49PM
boris said...
the company is in a favorable position to post growth for several years. What the analyst might be concerned is that dvP is the only high volume application for the moment and that the installed base of 700+ units might be *mostly* sufficent to handle the surgical volumes. If dvH is slow to ramp then the hospitals might be slower to build up the installed based of robots.
2-29-2008 @ 9:21PM
Nora W. Coffey said...
Although the decrease in value of this stock is of concern to stock holders such as yourself, Sheldon, I wonder if you are aware of another downside to this investment. ISRG is counting on an increase in Da Vinci robotic hysterectomy as a revenue stream. The vast majority of hysterectomies are unwarranted, they are medically unnecessary, and women are not informed of the well documented adverse effects of the surgery. Among the most common effects of hysterectomy are loss of uterine orgasm, shortened vagina, and loss of support to the bladder and bowel. For information about the far reaching effects of the end product of Da Vinci robotic hysterectomy visit www.hersfoundation.org/anatomy.