Mako Surgical (NASDAQ: MAKO) was flying high with a stock price at $45 in March 2012. But a succession of bad quarterly reports sent the stock crashing down to lows of $10.30.
Like Mazor Robotics, Mako produces robotic surgical equipment, in this case for knee and hip surgery. Robotic surgery has been an area of interest since Intuitive Surgical produced huge returns – over 1,100% for investors following David Gardner’s Stock Advisor service. Peter Lynch advised that looking for "the next" was usually a mistake, but despite the recent price crash it seems that Mako has a chance of being the exception to this rule.
Mako is at a much later stage the Mazor, but it still has a little way to go before reaching profitability. It follows a "razor and blades" model: once a system sale has been made it produces a stream of consumable sales.
When Mako gets enough system sales out in the field, it will become cash flow positive on consumables alone. At this point, all future system sales become "gravy" instead of "necessity" – a very juicy situation from an investor’s point of view. If the company is successful, this will take about three years.
Stage one is to reach basic profitability. If Mako meets its sales targets of increasing its current installed base from 161 systems to just over 200, this will happen in about a year.
Given the company’s record of bad surprises and price crashes in the past, investors are sceptical that this can be achieved. But the company has restructured its management and sales operation and the early signs are encouraging
Tom, All I can say is I wished I still shared your optimism. Well I guess I have to at this point. MAKO has a bunch of my money. I think when they sold more shares at that offering without ever telling shareholders at I think it was 13. I thought that was #$%$. I've been holding for a long time and yes I will be patient. You say 2 -3 years more? Lets see. BTW FWIW I like your post.
He says in about a year. Shave 6 months off of that. Mako is not going to surprise us with roses and a Filet Mignon dinner. She is just going to keep making us blackened ribeyes, quarter after quarter. Holding this has cost me soooo much but I do believe that THIS quarter, and at the very worst next, tells the tale. I am still in but admittedly at my break point. If Q2 was less than 7 I quietly walk. If we had 8 AND procedure growth I may wait for a spike like the 14th, the only one I have missed due to distraction. If we have 9 and flat or better I wait anothrr quarter.
The cabanas are looking more like Dr. Pepper machines in the Nevada sun these days. If we get a nasty preannounce I will takes my losses and go.