🤖 Buy these robotic companies

Good morning Pros! In today’s issue, we’ll look at three great robotic companies to invest in and also discuss Nvidia, which is our Investment of the week.

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📊 Stock analysis: Buy these Robotic Companies

With robots taking over and AI impressing everyone, now is the time to invest in companies that sell robots.

Here are our top three picks:

Rockwell Automation

Rockwell Automation, a leader in industrial automation, boasts a workforce of over 29,000 employees and operates in more than 100 countries across three divisions: discrete, hybrid, and process. The current tight labor market and global concerns over supply-chain stability have significantly increased demand for Rockwell's automation expertise.

Rockwell provides a comprehensive suite of solutions, including industrial control systems, motion control technologies, IT integration, and factory automation software. These solutions enable manufacturers to automate production lines, enhance data-driven decision-making, and improve operational performance.

The company has consistently increased its profitability, as measured by free cash flow, over the past decade. As manufacturing partners seek new ways to boost productivity, Rockwell is poised to benefit, potentially rewarding shareholders with rising dividends and share repurchases.

Notably, Rockwell is recognized as one of the best dividend stocks, offering a quarterly dividend that has been raised for eight consecutive years. Last year, the dividend increased by 5.9% to $1.25, delivering a yield of approximately 1.73%.

Currently trading at $269.76, Rockwell’s stock has a 52-week high of $348.52 and a 52-week low of $252.11. The stock has declined by -11.95% since the beginning of the year and is down -4.04% over the past 12 months. However, analysts remain optimistic, with an average price target of $283.64. 

The highest analyst target is $316.00, while the lowest is $245.00, representing a 4.73% increase from the current price of $270.84.

The company has been leveraging its robust free cash flow to acquire robotic companies.

In September last year, Rockwell spent $600 million to acquire Canada-based Clearpath Robotics and its subsidiary, OTTO Motors. Clearpath specializes in robotics for industrial applications, particularly in auto manufacturing.

Additionally, in March 2023, Rockwell acquired India’s Knowledge Lens, an AI services and solutions company for manufacturing, for an undisclosed amount.

Rockwell’s financial performance is strong. In the first quarter of fiscal 2024, revenue increased by 3.6% year over year, with recent acquisitions contributing 1.4% to that growth. However, EPS was down 17% from the same quarter a year earlier, to $1.86, partly due to acquisition-related expenses.

For the full year, Rockwell expects revenue growth between 0.5% and 6.5% and EPS to range from $11.24 to $12.74, compared to $11.95 in 2023.

Overall, Rockwell Automation appears to be a promising investment. With profit expected to grow by 27% over the next couple of years, the future looks bright. Increased cash flow is anticipated, which should support a higher share valuation.

Symbotic

Trading at $43.99 and down -11.47% year-to-date, Symbotic is a leading robotic company worth considering for investment.

Symbotic specializes in autonomous warehouse solutions, leveraging AI to optimize the storage, retrieval, and transportation of goods. Their comprehensive solutions integrate software, robots, and racks to enhance the speed, accuracy, and flexibility of warehouse operations.

Symbotic’s revenue has consistently doubled since 2020, and management anticipates increased recurring revenue, providing greater top-line predictability as more products are deployed.

Key clients include Walmart, the world’s largest company by revenue, which utilizes Symbotic systems in 42 of its regional distribution centers. Other notable customers are Target and Albertsons, the second-largest grocery chain in the U.S.

In the first quarter of fiscal 2024, Symbotic reported revenue of $369 million, marking a 79% year-over-year increase, though it also recorded a net loss of $14 million, compared to a $68 million net loss in the same period the previous year. The company's valuation remains high despite its unprofitability, reflected in a market cap exceeding $26 billion, with $1.18 billion in revenue for 2023.

Symbotic appears to be a promising investment due to rising demand and technological advancements. Their latest machines feature a new AI chip with enhanced computational power, improving throughput and enabling robots to recognize various package sizes, including damaged boxes.

Currently in a growth phase, Symbotic is actively deploying its technology across customer warehouses, as evidenced by strong year-over-year revenue growth.

In the fiscal second quarter, the company achieved sales of $424.3 million, a nearly 60% increase from the previous year. At the end of Q2, Symbotic had 18 systems fully implemented in customer warehouses, with an additional 37 in progress, compared to nine fully operational systems and 28 in progress a year ago.

To accelerate growth, Symbotic formed a joint venture with SoftBank called Greenbox, which recently signed its first customer, with revenue from this deal expected in the third quarter.

However, Symbotic remains unprofitable, reporting a net loss of $41 million in fiscal Q2. Despite this, the company's net loss has improved from the prior year's $55.4 million loss.

Another consideration is the two-year timeframe required to implement Symbotic's platform, compared to competitors like KION Group's Dematic, which can implement automation systems in as little as 16 weeks for smaller spaces.

Symbotic is working to reduce its implementation timeframe, recently completing a deployment in 20 months.

Overall, Symbotic offers a potentially profitable investment, though it is a high-risk, high-reward situation. The stock has a buy rating, with an average price target of $55.14, a high forecast of $60.00, and a low forecast of $46.00.

The average price target represents a 25.35% increase from the current price of $43.99.

Intuitive Surgical

Last on the list is Intuitive Surgical currently trading at $398.82 and up 20.50% YTD and 27.73% in the last 12 months. It is very close to its 52-week high of $403.76 and far from its 52-week low of $254.85.

A pioneer in robotic-assisted surgery, Intuitive Surgical is widely regarded as a safe bet given the industry's growth. Its robots enable surgeons and their teams to perform more precise procedures, significantly improving patient outcomes and recovery times.

Intuitive Surgical is best known for its da Vinci robotic-assisted surgical systems, with an installed base of over 8,200 units in hospitals and medical settings. In 2019, the company introduced the Ion endoluminal system, a robotic-assisted platform for minimally invasive lung biopsies, adding to its robust product lineup.

The company continues to experience record growth year after year. Since its inception, the da Vinci Surgical System has been used in over 13 million surgeries across various specialties, including urology, gynecology, general surgery, and cardiothoracic surgery. The da Vinci product line also provides recurring revenue through services and operational leases.

In 2023, Intuitive Surgical reported $7.14 billion in revenue, a 14% increase from 2022, and an annual EPS of $5.03, up 37.8%. The installed base of da Vinci systems reached 8,606 by year-end, a 14% increase over 2022.

A significant driver of the company’s revenue growth is not just product sales but also the servicing and per-procedure fees associated with these machines. In 2023, instruments and accessories revenue grew by 22% to $4.3 billion.

Intuitive Surgical remains in growth mode, with ample opportunities to develop new da Vinci capabilities and other robotic surgery devices like the Ion, as most surgeries performed today are still done without robotic assistance.

The stock is well-positioned, having exceeded expectations and trading higher than Wall Street estimates.

With a 461% rise over the last decade, the company's trailing-12-month research and development (R&D) expenses are nearly $1 billion, around 14% of its annual revenue.

These R&D efforts focus on developing new imaging systems, robotic toolheads, training programs, software packages, and other accessories, which can be sold to hospitals that already own the primary robotics suite, generating additional revenue.

Secondary instruments and accessories brought in $4.2 billion in 2023, up from $3.5 billion in 2022. The launch of new product editions, such as the da Vinci 5 with its advanced features, will likely lead to additional maintenance requirements, resulting in repeat sales. In 2023, maintenance services generated $1.1 billion in revenue, up from $1 billion the previous year.

Intuitive Surgical is highly profitable, consistently adding to its top and bottom lines, and maintains a low debt level of $90 million.

Overall, it can be a great investment with few risks, but it may only be suitable for long-term investors.

📰 Investment of the Week: Nvidia

Set to announce earnings on May 22, 2024, Nvidia is our Investment of the Week.

The question is if after this earnings report, the company would finally break the $1,000 barrier.

Data shows that Nvidia shares have moved higher in the immediate aftermath of earnings 8 out of 12 previous reports. On average the stock moved up 5.3% in the first day of trading after the company reported earnings.

Interestingly, the options market overestimated NVDA stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±7.5% on average vs an average of the actual earnings moves of 7.4% (in absolute terms).

Based on this, we see the stock crossing the $1,000 mark if it’s a positive report.

But a negative report could cause it to go under $900 again. So, play carefully.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.