Why Intuitive Surgical, Netflix, and Amgen Are Today's 3 Worst Stocks

A six-day win streak -- in any sort of competitive situation against challenging opponents -- is hard to come by. It's pretty tough to pull off in the stock market, too, and, though the S&P 500 Index (SNPINDEX: ^GSPC  ) wasn't far off from a seven-day rally, the fun finally came to an end and stocks returned to the red on Wednesday. New home sales in March fell sharply and without warning, while lousy earnings from Wall Street also sent the S&P southward, as it shed 4 points, or 0.2% to finish at 1,875. Intuitive Surgical (NASDAQ: ISRG  ) , Netflix (NASDAQ: NFLX  ) , and Amgen (NASDAQ: AMGN  ) each finished in the depths of the proverbial Wall Street dumpster.

Intuitive Surgical's miserable 11.5% plunge came after the robotic medical systems maker posted similarly miserable quarterly results. Sales in the period were off 24% from the year before, while net income took an even bigger hit, plunging 77%. To its credit, the company actually warned investors two weeks ago that the quarter would be a disaster, even specifically noting that revenue would slump 24%. So what curveball did Intuitive Surgical throw investors today? It looks like the growth in procedures requiring the company's da Vinci product will grow between 2% and 8%, instead of the 9%-12% clip expected previously. 

Netflix is trying to develop an in-house network of proprietary content to differentiate from competitors. Source: Netflix site

For investors who like to invest in simpler, easier-to-understand companies, ignoring robotic surgery companies is a good rule of thumb. While the technology sector isn't simple by any means, many tech companies like Netflix have business models that are easy to understand. Alas, Netflix's elementary business plan was no shield to Mr. Market on Wednesday, as the stock tumbled 5.2%. After Netflix crushed its earnings and revenue expectations on Monday, two direct competitors seriously beefed up their offerings today: will be licensing select HBO programs for Prime members, and AOL is creating its own streaming service. With Hulu, Redbox Instant, and many others coming to life like relatives after a big lotto win, Netflix will have to fight for subscribers harder than ever. And you can be certain its content acquisition costs won't be going down anytime soon. 

Lastly, shares of Amgen lost 5% Wednesday, taking a page from Intuitive Surgical and earning its sell-off by posting a lousy quarter. "Lousy" is relative, of course: sales were actually 6.6% higher in the first quarter than they were in the first quarter of 2013. Its best-selling drug, an arthritis treatment called Enbrel, nearly logged $1 billion in sales all by itself. Amgen took a real hit on its bottom line, where earnings per share, or EPS, fell from $1.88 in the first quarter of 2013 to $1.07 in the first quarter of this year. While that sounds like something investors shouldn't stand for, the bottom line was mostly hit by increasing R&D spending at Onyx, an oncology treatment company it acquired in October. So Amgen made less money last quarter because it's investing in ways to fight cancer -- not such a terrible thing, on second look.

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  • Report this Comment On April 24, 2014, at 1:41 AM, sliderw wrote:

    Netflix and its competitors are gradually becoming the TV channels of the new era, in that there will apparently be many of them. There will not be a monopoly in content distribution.

  • Report this Comment On April 24, 2014, at 1:41 AM, sliderw wrote:

    Netflix and its competitors are gradually becoming the TV channels of the new era, in that there will apparently be many of them. There will not be a monopoly in content distribution.

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Fool since 2012, unique fingerprints since birth. Age 7: Put lifetime savings ($18.37!) in the bank, became disillusioned with low interest, and a fascination with the stock market was born.

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