Investors are constantly on the lookout for the next big thin sector which will usher in a wave of change in society. Companies in these sectors have the potential to be the next big thing in the market. Robotics stocks are one such emerging sector.
Robotics will change society in profound ways, or that is, they will continue to do so. They’re already involved in manufacturing of course, but also in medical and aerospace applications and beyond.
Bearing that in mind, here are 7 innovative robotics stocks to buy for future profits:
- Intuitive Surgical (NASDAQ:ISRG)
- Brooks Automation (NASDAQ:BRKS)
- ABB (NYSE:ABB)
- Stryker (NYSE:SYK)
- Accuray (NASDAQ:ARAY)
- Raytheon (NYSE:RTX)
- AeroVironment (NASDAQ:AVAV)
All of these stocks have serious growth potential from current levels.
Innovative Robotics Stocks to Buy: Intuitive Surgical (ISRG)
Intuitive Surgical is usually the first name investors think of when the topic of robot assisted surgery arises. And the company’s Da Vinci surgical system is likely the machine that comes to mind.
The Da Vinci system was first FDA approved for use in laparoscopic procedures and its applications have expanded since. Thereafter, the system has a long track record having been utilized in 7.2 million procedures through 2019. Additionally, there are nearly 5,600 Da Vinci systems currently being used in 67 countries worldwide.
Health systems across the world have diverted resources toward the pandemic and in the service of the fight against Covid-19. Intuitive Surgical has also been affected by this downturn. The company shipped 178 Da Vinci systems in Q2 2020 as opposed to 273 in Q2 of 2019.
Obviously hospitals are less likely to pony up the large cash outlay for the system in this environment. Such resources are more necessary in the fight against coronavirus. The company has also noted a downturn in elective surgeries during the pandemic.
Yet the company remains financially very stable and profitable. Net margin, ROE and ROA are all in the 80th and 90th percentiles relative to industry peers(2). The company remains innovative not only from the perspective of utilizing Da Vinci for more procedures.
It also has a system called Ion which is used for lung biopsies. FDA approval is a lengthy process and Intuitive knows that as well as any company. In that sense, innovation is likely to remain a strength of the company. The more procedures it can be used for, the more revenue will come into the company.
This should lead to price appreciation for investors. Even with the lull in activity due to the pandemic ISRG stock is near a 10-year high. I’d say pick it up on a dip, but it’s hard to predict when that might be if not now.
Brooks Automation (BRKS)
BRKS stock has dipped since August, so now might be a good opportunity to pick it up. The Massachusetts company produces wafer handling robotics for the semiconductor industry among other products.
Analysts are evenly split, with 3 rating it a “buy” and 3 rating it a “hold” currently. Their price targets average $56 and range as high as $72. These numbers represent strong returns relative to its $45 price tag now.
The company has lofty goals for its two primary business segments, Life Science and Semiconductors. First, the company forecasts that it will see CAGR in revenue of 14% from 2019 to 2022.
Further, it also expects total revenues to rise from a reported $781 million in 2019 to $1.2 billion in 2022. Therefore, investors may be very interested to learn that it also predicts per share earnings to rise to between $2-$2.40 in the same period(2).
The company currently pays a dividend of 10 cents but given that the payout ratio is .71, it may have to be reduced to meet the previously mentioned targets.
ABB has 4 businesses, one of which is Robotics and Discrete Automation. The company is therefore, not a pure play on robotics. The robotics division is #2 globally with a heavy emphasis on China.
ABB classifies its robots into collaborative and industrial robots. Collaborative robots work alongside humans and are designed with low payload and inspection applications in mind. The company’s industrial robots span a wide range of niches and applications.
ABB is planning to address robotics trends including changing labor environments, the need for customization, and digitalization. The company currently receives 51% of robotics revenues from Europe but is heavily focused on China, where 25% of robotics revenues come from. It sees the $55 billion robotics market as one which it can address well from its #2 industry position.
The company is undergoing a restructuring currently and has issues to address. It is likely that shares will remain volatile for some time yet the robotic division looks promising. However, investors should note that the company’s 4 business areas diversify its growth potential. This means robotics revenues are folded in with all other division revenues.
Stryker’s MAKO Robotic assisted surgery system is somewhat analogous to Intuitive’s Da Vinci product. The company operates across a wide swath of healthcare but MAKO is its robotics solution. It recently installed its 1,000th MAKO system. The system is used in total hip replacement surgery, total knee replacement surgery, and partial knee replacement surgery. It has shown better outcomes for those procedures which is ultimately one of the big promises of robotics. The company’s MAKO system has been used in 340,000 procedures to date.
The company has been hard hit similar to Intuitive and for the same reasons. Net sales decreased 24.3% in Q2. Yet, SYK stock sits close to a 10-year high with a PS ratio that is also near a 10-year high. Analysts rate it a buy 13 to 10 in favor of buying over holding.
The company does have a dividend of 57.5 cents and it has a sustainable payout ratio which should help future profits for investors.
Raytheon is a business group with 4 arms spanning defense, aerospace and aeronautical engineering, among other industries. Because it is so heavily connected to the aerospace sector, it has been particularly hard hit during the pandemic, failing to bounce out of the pandemic trough along with the majority of the market.
And that’s only part of the reason that this stock is an interesting one to consider. RTX stock is not going anywhere for some time and will continue to be a major name in American defense for a long time to come. The point is that at prices as low as they are currently, there really seems to be little risk and what looks like nearly guaranteed upside. And analysts are keen on Raytheon shares with a predominantly ‘buy’ opinion.
But aside from Raytheon’s overall fitness as a company and an equity, it is also interesting because of its connection to robotics. Many readers are likely aware that Raytheon has a presence in drones. But the company does a lot more in robotics.
One area to consider in terms of innovative robotics is that of exoskeletons. Specifically exoskeletons which will be worn by soldiers. Raytheon was jointly working with Sacros on a project called XOS 2 that ultimately fell through. However, the company will almost certainly remain a leading name in robotics.
Considering that Goldman Sachs recently put Raytheon on its buy list, now might be a great time to take a position. It will continue to dominate in the drone space and will be connected to robotics and defense.
Accuray is a California company with less than 1,000 employees. The company focuses on products which deliver radiotherapy in the treatment of cancer. The company has developed machines and robotics to that end. Accuray’s CyberKnife System delivers non-surgical stereotactic treatment across various organs afflicted by cancer.
Accuray recently released the CyberKnife S7. One interesting aspect of the robot is that it has an AI function which helps ensure that radiation remains targeted on a tumor. Patients can shift during targeted radiation which lessens the efficacy of targeted therapy. Accuray ends its fiscal year on June 30. In Q4 of 2020 Accuray reported $94.3 million in order volume which represented a 10% increase.
Investors who are interested in the company will note the similarities between it and Intuitive Surgical. Yet, they are far different companies. Accuray is highly speculative, and sits firmly at the growth end of the investment spectrum. Whereas, Intuitive Surgical is well-established. Furthermore, ARAY is technically a penny stock at prices near $2.50.
Thus, I cannot say I’m 100% sold on it, but there is a lot of upside and it has shown some strength. The 4 analysts who cover the stock all do rate it a buy.
AeroVironment is a leader in Unmanned Aircraft Systems. The company sells exclusively to Government entities and is an equity that may appeal to defense minded investors seeking a focus on drones.
AeroVironment did manage to increase revenues by 1% in Q1 of 2021. More importantly, the company is a well-established name in the space and isn’t likely to add risk to a portfolio. AeroVironment is financially strong, profitable, and somewhat undervalued. Analysts have a current price target of $85, which represents a nice return based on current prices.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.