Will This Shark Ever Swim Again?

It's been a tough summer for robotic orthopedics specialist MAKO Surgical (Nasdaq: MAKO  ) . The stock plunged headlong when the company reported soft results in the first quarter. Management poured salt on that fresh wound in July by pre-announcing another weak slate of results, and shares crashed again. MAKO blamed a spate of delayed sales for this particular miss but didn't back that statement up with strong guidance for the third quarter, so I took the stock off my list of bullish CAPScalls.

Today's 10% overnight share-price jump might make you think that everything is all right, but if so, you're not looking hard enough. Current prices just under $13 per share remain a far cry from the $25 seen in early July, not to mention $40 back in May. The wheels are coming off this bandwagon.

Analysts adjusted their targets en masse based on MAKO's mid-quarter update, and the company managed to beat the lowered earnings consensus in last night's complete second-quarter report. MAKO reported a non-GAAP net loss of $0.20 per share, one penny better than the updated Street view. Sales, of course, landed exactly where everyone expected them to at $23.7 million.

This stock used to be a concentrated growth potion. Year-over-year sales growth of 27% might seem like an intact growth story, but that's drastically lower than last Quarter's 51% revenue jump -- which in turn was a disappointment on the heels of even faster increases.

CEO Maurice Ferre remains undaunted, pointing us toward the growth potential he sees for the next five to 10 years. In his defense, MAKO may be bleeding cash but has the debt-free balance sheet to reach for the stars just a little while longer. The question is, can MAKO restart its stalled growth engines before the financial safety net breaks down?

To overcome the sudden slack in the growth line, MAKO hired an as-yet unidentified executive from fellow robotic surgery specialist Intuitive Surgical (Nasdaq: ISRG  ) and is working him hard in meetings with interested hospitals. I prefer investing directly in Intuitive Surgical's proven operations rather than hoping that its success will rub off on MAKO's operations.

Want to learn more about MAKO's hip replacement procedures, margin leverage, and system sales? Dig into all that juicy information and much more by grabbing our brand-new premium report on Mako. You'll even get a full year of high-quality analysis to go with the report. Get started right now.

Fool contributor Anders Bylund owns shares in Intuitive Surgical but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Intuitive Surgical and MAKO Surgical. Motley Fool newsletter services have recommended buying shares of MAKO Surgical and Intuitive Surgical. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 02, 2012, at 6:21 PM, midnightmoney wrote:

    Well, you guys were pumping this stock hard when it was in the 40s. This would seem an even more enviable position to get in at now, wouldn't it? Or has that much changed over the last few months? I hope you can reconcile yourselves to the difference between the highs and lows and those who bought at so lofty an official thumbs-upping, and that it won't be another enoc debacle. Good luck with mako!

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