Stock talk on robotics
If you were there for it, you?ll remember that we opened our Investing in Robotics webcast (January 22) with a quick six-pack of tips on favored robotics stocks for 2015. They came courtesy of Randy Bateman, Chief Investment Officer at Huntington Funds.
The free webcast is archived here: Investing in Robotics: What to Watch in 2015
We opened with stock tips for the anxious in the audience, some of whom had emailed us prior to the show asking for, as one called it: ?Less yakety-yak, and more action.? So, courtesy of Randy Bateman, we trotted out at the top of the program: Accuray ARAY, Cognex CGNX, Faro Technologies FARO, iRobot IRBT, Intuitive Surgical ISRG, and Rockwell Automation ROK as companies that could be big winners in 2015.
All six represented actionable stock information needing a bit of scrutiny from savvy investors.
See related: Investing in Robotics: What to Watch for in 2015
Free Download: Investing in Robotics 2015 (report excerpts)
Debra Borchardt, writing for Seeking Alpha, was in the audience, and she took up the task of adding even more action to Bateman?s six to watch.
She began by underscoring Bateman’s suggestion: ?Robotics is where you should be investing in 2015.? And why exactly did he say that? In answer, she rolls out three quick bullet points for emphasis:
- Domestic task robots are forecast to sell 23 million units from 2014-2017
- Service robots are forecast to have $18.9 billion in sales from 2014-2017
- Global spending on robots is expected to grow to $67 billion by 2015
I should have seen that
SEEKING ALPHA: Looking back at the beginning of the dot-com era, many investors missed it and in hindsight thought, “Of course, I should have seen that. It was so obvious.” Remember all the people that slammed Facebook when it went public and dived down to $21, ridiculing those that bought in. Or wished they would have bought Apple when Steve Jobs died and many said the company wouldn’t survive without him? Some believe that robotics is at that stage and that many investors don’t recognize that it’s time to start putting money into robotics.
Worldwide sales of robotics hardware in 2013 increased 12% year over year, to $9.5 billion, according to the International Federation of Robotics. Looking ahead to 2014-2017 the IFR forecast sales of service robots to increase to about 134,500 units with a value of $18.9 billion. It is projected that sales of all types of robots for domestic tasks (vacuum cleaning, lawn-mowing, window cleaning and other types) could reach almost 23.9 million units in the period 2014-2017, with an estimated value of $6.5 billion.
Squeezing significantly more cost out of production requires automation. The Boston Consulting Group has noticed and predicts that the $15 billion spent globally on robotics in 2010 will more than quadruple to $67 billion in 2025. Some feel that is a conservative figure.
Randy Bateman, Chief Investment Officer at Huntington Funds believes that as the consumer acceptance grows for robotics, so will the industry. Manufacturing acceptance is already there and consumers are not far behind. Bateman believes that these rapid changes will be like the dot com era and has highlighted his favorite robotic stocks. Even though drones were picked as the breakout investment for the year by robotics enthusiasts, Bateman did not include any in his list. “While they are getting lots of attention, the FAA is still trying to reign them in,” says Bateman.
His top robotic picks for 2015 include iRobot, Intuitive Surgical, Accuray, Cognex, FARO Tech and Rockwell Automation. All of these stocks are in the Robo-Stox index (NASDAQ:ROBO), which is down 1.97% for one year, but has a return of 21.5% for three years. The Robo-Stox index is comprised of 40% bellwether robotic stocks and 60% non-bellwether robotic stocks.
iRobot (NASDAQ:IRBT) is the most recognizable of the consumer robots. Its most famous product is the Roomba vacuum that ranges in price from $400-$600. The biggest concern for iRobot is the increasing competition. The company itself admits that competition will be a real challenge for them. A rival product by Neato gets better consumer reviews and the Dyson robotic vacuum will be on the market later this year. Dyson is known for making a superior product and has invested $47 million in research for its 360 Eye product. Bateman though believes that iRobot will continue to enjoy first to market advantage. Revenue for the company jumped 26.1% to $159.3 million for the 2014 fourth quarter, but missed expectations of $165 million. Annual revenue rose 14.2% to $556.8 million based on the home robot sales. The market also wasn’t thrilled when iRobot said its first-quarter earnings would be closer to eight cents a share – not the $0.27 analysts wanted. The stock price has dropped 8% for the past year. The future for iRobot though may be in its future products. The company is developing products using robotic hands and object manipulation. An investment in iRobot at this point is for investors that believe in the company’s future product line.
Intuitive Surgical (NASDAQ:ISRG) is another familiar robotic name for the average consumer. It is well known for its DaVinci robotic surgical device used for minimally invasive operations. Fewer and smaller incisions allows for patients to heal more quickly. Consumers are growing in their comfort with their surgeons using these robots. According to the company, the DaVinci system has been used in over 1.5 million surgical procedures. Intuitive beat its earnings estimates on January 23, when it delivered fourth-quarter EPS of $4.18, besting the Zacks consensus estimate by 75 cents. Revenue increased 4.3% year over year and the company announced a $1 billion stock buyback. The stock has pulled back in the past month, down 1.7%, allowing for a nice entry point. Overall the stock has been in a steady uptrend since May of 2014.
Accuray (NASDAQ:ARAY) is another medical robotic system. This California company designs, develops and sells radiation therapy systems for the treatment of tumors. The company reported a loss of 13 cents per share on January 28th, missing earnings and revenue expectations. The stock price has dropped 22% over the past year, hitting a low of $6.22 in October of 2014. Morgan Stanley though sees value in the company and gives it an $11 target price. Accuray has new product launches this year and is considered to have a very advanced product. The challenge for the company will be convincing insurance companies to be willing to reimburse consumers for using the technology.
Cognex (NASDAQ:CGNX) is part of the manufacturing side of robotics. Cognex robotics “watch” products coming through the manufacturing process and checks for defects or errors. Most people aren’t even aware that one billion items a day pass by a Cognex vision system or that Cognex inspects the paper that U.S. currency is printed on. Revenue for 2013 was $353 million, an increase of 9% over 2012. While the stock price has bounced around, it’s been essentially flat for the past year. Fourth-quarter earnings will be released February 12, 2015. Analysts believe the revenue will grow 18% year over year and the EPS will grow 13%.
FARO Technologies (NASDAQ:FARO) is another manufacturing robotic company. Its products are known for their scanning abilities and its applications vary widely. This reduces its dependence on any one industry. The products are used by Aerospace companies like Boeing and Lockheed Martin. Consumer companies like Harley Davidson, Xerox and Polaris are all customers. Analysts expect that the fourth-quarter revenues will grow 12% year over year and the EPS will grow 31% year over year. The stock is down from its year high of $65.63 and average target prices assume the stock will return to that number. Fourth-quarter earnings are expected to be released between February 24th and March 2.
Rockwell Automation (NYSE:ROK) is the largest company dedicated to industrial automation. It is headquartered in Milwaukee Wisconsin, but employs 22,000 people and serves customers in 80 countries. First-quarter 2015 results saw sales drop 1.1% due to currency headwinds, while earnings grew 12%. Its strongest areas were the Architecture and Software segment and Latin America. The challenge for Rockwell going forward is the strength of the U.S. dollar which is causing the company to narrow its guidance range. Rockwell is also concerned about its oil and gas customers. While it hasn’t seen an impact yet, it sounds as if the company expects some pullback due to crash in oil prices. Oil and gas customers account for 12% of sales. The stock is down from its year high of $128 and the earnings per share has been revised 11 times in the past 30 days. So it would seem to be the riskiest pick from Bateman, however the stock is actually up 2.8% for the past three months.
This list of six robotics stocks is just an introduction to a sector that has many moving parts. The Robo-Stox index breaks down the industry into 14 different sub groups of robotic companies. Investors can decide whether they want to be in 3D printing, military or consumer robotics. The main thing is that investors get into this trend in the early stages so that they don’t find themselves saying, “I should have seen that.”
Having a jones for drones
Seems as though the the world has fallen in love or out of love with drones these days. Our webcast audience was roughly split in two, with the most vociferous being those in the drone-friendly camp. Debra Borchardt took special notice of them,
The other piece she penned spoke to was the drone dilemma and the tremendous upside if these autonomous machines get airborne over America: “The audience of Robotics Business Review webcast picked drones as their top investment idea.” See: Robotics Crowd Picks Drones As Top Investment Idea.