It's been a rough year for robotic-surgery innovator MAKO Surgical (Nasdaq: MAKO ) . After reaching all-time highs in the spring, its stock fell through the floor following weak first-quarter earnings. The beating turned into a bloodbath in the wake of similarly disappointing second-quarter earnings. Long-term investors are still showing gains, but that's little consolation for more recent buyers:
Can MAKO recover? Investors will need to keep their eyes on three key trends that will determine whether the company gets unplugged from life support or becomes a star again.
1: Can MAKO sell more systems?
MAKO's latest guidance calls for sales of 42 to 48 RIO surgical systems for the full year. That's still fully possible, as the company sold 21 systems over the first half. However, even the high end of this estimate would only match MAKO's 2011 system sales, and flat sales growth is not something any growth investor wants to see. It also represents a steep drop from guidance that started at 56 to 62 system sales and was lowered earlier in the year to 52 to 58.
Recovering from multiple guidance cuts will go a long way toward restoring investor confidence, but that's not the only big number we're watching.
2: Will MAKO beat its full-year procedure guidance?
Last year, MAKO's hospital clients performed 6,932 MAKOplasty procedures -- a doubling of 2010's numbers. The company still expects between 11,000 and 13,000 procedures to be performed for the full year, which would roughly double the rapid growth seen last year. That's still a long way off from the reported 360,000 procedures performed with Intuitive Surgical's (Nasdaq: ISRG ) machines in 2011. It also helps explain why MAKO still struggles to become profitable.
3: Is MAKO's specialized surgical niche big enough for long-term profit?
MAKO isn't profitable, but revenue is booming:
Meeting its procedure goals will go a long way toward making the company consistently profitable. Once its installed base is large enough and demand stays steady for MAKO procedures, it should finally tick into the black. However, it remains to be seen when that profitable date will arrive, as analysts don't see the company making a profit this year or next.
As mentioned earlier, widespread adoption is critical when pushing advanced technology in medicine. Fool analyst Evan Niu paints a gloomy picture of MAKO as another Hansen Medical (Nasdaq: HNSN ) , should sales and procedures fail to tick up significantly. Investors have to be strongly aware of their investing timeline when it comes to high-risk, high-reward stocks like MAKO (and, at one point, Hansen Medical as well).
MAKO may see substantial benefit from the increased health coverage Obamacare brings over the next few years. However, Obamacare may also manage to improve the long-term health picture of at-risk populations, thus decreasing the need for MAKO's joint-replacement procedures. Fool analysts John Reeves and David Meier presented a bullish pitch for MAKO last week that hinges on wider adoption, noting that MAKO's robotic surgeons have seen fairly consistent upticks in their usage over time. The more MAKOplasties doctors perform, the more comfortable they'll be. The virtuous circle will work in MAKO's favor, once it takes full effect.
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