What type of stock is Tesla? A decade ago you would probably have said it was an electric vehicle (EV) stock. Nowadays though, Tesla often gets called a ‘physical AI’ company.
In other words, it’s focused on applying AI to the physical world in the form of robotaxis and humanoid robots. The company says these will “build a world of amazing abundance“.
Whether you believe that or not, it can’t be denied that this is a truly massive future market. Why else would Tesla still have a massive $1.37trn market-cap despite falling automotive sales and profits? The potential’s undeniable.
Here then, I want to highlight two exciting robotics stocks not named Tesla that I think are worth considering.
Intuitive Surgical
Let’s start with Intuitive Surgical (NASDAQ:ISRG), the global leader in robotic-assisted surgery. Its da Vinci systems help surgeons perform minimally invasive operations with greater precision and control. They’re incredible machines.
However, the stock’s fallen 25% year to date due to tariff uncertainty (it manufactures in Mexico), rising competition, and the tragic death of a patient during surgery. The latter relates to incomplete staple lines, which the firm’s dealing with via product recalls.
Obviously, this presents reputational risk and is something I’ll be watching closely. However, I think this also presents a potential buying opportunity to consider for a couple of reasons.
First, the company continues to put up impressive numbers. In Q1, worldwide procedures (both da Vinci and Ion, its robot primarily used for the early detection and biopsy of lung cancer) increased by 17%. Revenue jumped 23% to $2.77bn.
Next, the installed base continues to grow, reaching 11,395 da Vinci and 1,041 Ion systems. This increases the company’s moat because there are incredibly high switching costs (hospitals are reluctant to scrap proven systems and retrain staff).
What’s more, Intuitive’s recurring profitable revenue continues to compound (the machines need a constant supply of new parts to work hygienically and safely). This reached 86% of total revenue in Q1.
Finally, after the fall, the stock’s trading at 40 times forward earnings versus a historical average of 57. Not cheap, admittedly, but better value than some time.
Looking ahead, an ageing global population and further expansion into general surgery (hernia repairs, etc) should support robust long-term growth.
XPeng
Next, I want to highlight XPeng (NYSE:XPEV), a Chinese EV company that’s pivoting to driverless taxis and humanoid robots (sound familiar?).
Earlier this week, we got Q1 results and they were a bit mixed. Revenue declined 17.6% to RMB13bn ($1.89bn), while vehicle deliveries dropped 33.3% to 62,682. There was also a narrow net loss (unprofitable firms obviously add risk).
On the plus side, a gross margin of 20.6% was a massive jump from 15.6% the year before. This shows XPeng is successfully cutting manufacturing costs. And it’s just launched the XPeng GX, a new tech-heavy SUV, which is selling like hotcakes.
Looking further out though, it’s the robotics opportunity that appears intriguing. XPeng’s reiterated its goal to begin mass production of its cutting-edge IRON robot by the end of 2026.
These humanoids will then be deployed as sales reps in its vehicle showrooms next year, before global exports begin.
Unlike Tesla, XPeng looks cheap, trading at just 1.4 times sales. It also ended Q1 with $6.1bn in cash.
Should you invest £5,000 in Intuitive Surgical right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Intuitive Surgical made the list?
Ben McPoland owns shares of Intuitive Surgical.
