NEW YORK (TheStreet) -- I've become somewhat perplexed witnessing what has gone on with shares of Intuitive Surgical (ISRG), which are down 8% following what was on balance a strong fourth-quarter performance.
In odd fashion, investors cheered when management preannounced its results, advising that revenue was going to be down 5% for the quarter. The stock shot up as much as 7% -- only to see the shares get punished mercilessly when management released the actual results just days later. This makes absolutely no sense. The surprise was gone. This reaction goes back to what I said three months ago about the level of irrationality that remain with this company.
In the November article, I said:
Given the tone of this article, investors will likely be upset and I understand that. But I've never been one to chase a growth story, especially when it seems too good to be true. But there's no one to blame for willfully ignoring the warning signs, many of which Intuitive have provided.
That said, I do believe these shares will rebound. It's just not going to happen right away. There are plenty of operational issues management must first address. Not the least of which has to do with the wellbeing of customers who use their products. As with St. Jude Medical (STJ), Intuitive is operating under a warning letter from the Food and Drug Administration. But unlike St. Jude, Intuitive shares are now feeling the pressure.
At the risk of sounding like I'm tooting my own horn, it looks as if I was spot on. Look, it's not Intuitive's fault that the Street has had a love affair with its stock. Known for its daVinci surgical robots, which has dominated areas like the prostatectomy market, this company has been one of the cleanest growth stories in med-tech space. There's no disputing that.
My problem has always been with those who claim that "valuation doesn't matter." The more growth this company provided, expectations went higher. To its credit, over the past couple of years, Intuitive has delivered the goods. The stock has been gainfully rewarded, climbing from $100 in 2009 to $583 last year. All of a sudden, valuation matters.