Robotics stocks are considered part of the technology sector or, more specifically, within sub-sectors focused on automation and advanced manufacturing.

Below are four that a selection of our free-site contract investment writers are highlighting as worth a second look today…

Emerson Electric

What it does: Emerson Electric is a US-based multinational that makes products for a range of commercial and consumer uses.

By Christopher Ruane. Emerson Electric (NYSE: EMR) is not a new kid on the block. The storied manufacturer has been on the go since the 19^th century. But it is not stuck in the past and has embraced the robotics age by producing a wide range of products aimed at industrial and factory automation. Its Ovation automation technology sits underneath 20% of global power generation.

The business has raised its full-year outlook, with the chief executive telling investors, “we are energized about the power of our differentiated automation portfolio.” One risk is ongoing weakness in factory automation after a recent strong run, especially in the Chinese market.

But Emerson is solidly profitable and offers a dividend yield of 2.0%. The shares have risen 67% in five years.

I think ongoing demand for new automation products and servicing existing ones for its large installed customer base could help power the Emerson share price further.

Christopher Ruane does not own shares in Emerson Electric.

Intuitive Surgical

What it does: Intuitive Surgical is the world leader in robotic surgery, renowned for its Da Vinci systems.

By Oliver Rodzianko. Intuitive Surgical (NASDAQ:ISRG) is one of the most exciting companies I know of right now. Its Da Vinci systems are truly breathtaking. These allow a more precise and less invasive form of surgery in which surgeons perform operations remotely.

In addition, it’s the current leader in the field. Therefore, I think the company is the best positioned to transition to autonomous robotic surgery in the future. For this reason, I can imagine Intuitive Surgical becoming one of the hottest investments in the coming years.

However, the company might not effectively make the transition. It could find itself outcompeted by new startups which are offering AI and robotics operations. That’s a long-term risk versus a potential reward that I’m considering.

I reckon I’ll be investing in Intuitive Surgical soon. Even though its valuation is very high, with a price-to-earnings ratio of around 75, the stock price just keeps on chugging higher.

Oliver Rodzianko does not own shares in Intuitive Surgical.

Smith & Nephew

What it does: Smith & Nephew supplies medical devices in the fields of orthopaedics, sports medicine and wound management.

Medical business Smith & Nephew (LSE:SN.) has been around since 1856. But it’s no stranger to evolution and more recently has been devoting vast sums to the realm of surgical robotics.

The FTSE 100 company’s robot-assisted technologies allow healthcare workers greater precision while carrying out procedures. The benefits are an improved chance of surgical success and reduced recovery times for the patient.

Smith & Nephew’s ‘CORI Surgical System’ is the only robotics technology currently available for partial and total knee reconstruction. The company sees this as a key area for growth, and has added new functions and features to CORI over the past year.

Analysts at Mordor Intelligence expect the medical robotics market to grow at an annualised rate of 16.1% during the next five years. I believe Smith & Nephew’s huge investment in this area could yield significant results.

Royston Wild does not own shares in Smith & Nephew.

Symbotic

What it does: Symbotic is an AI-powered robotics and software company whose products help automate supply chain operations in warehouses.

By Ben McPoland. When I think of the robot revolution, Intuitive Surgical springs to mind. However, I’d expect steady compounding growth for Intuitive rather than explosive. Not so Symbotic (NASDAQ: SYM),though, which is a much smaller firm at an earlier stage of its growth trajectory.

The company’s robotic systems automate picking, packing, and the stacking and unstacking of goods onto pallets. It has smart backing in the shape of Walmart and Softbank, while Target is also a customer.

In Q2, revenue surged 59% year on year to $424m, topping Wall Street’s estimates. And while the company lost $41m in the quarter, analysts expect it to turn profitable within the next two years.

One risk I’d highlight here is very high customer concentration. Symbotic has a deal to implement its robots in all 42 of Walmart’s regional distribution centres in the coming years. If the retail giant paused this rollout, the firm’s growth would suffer badly. The overall market is also very competitive. 

Still, revenue is forecast to grow above 40% in each of the next three years. That’s pretty explosive!

Ben McPoland owns shares in Intuitive Surgical.

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There is one stock on my watchlist that keeps calling my name though, even more so after the firm’s impressive second-quarter results. Here’s why I’m interested.

Automating the warehouse supply chain

Symbotic (NASDAQ: SYM) is a robotics firm backed by Softbank and Walmart that builds and operates automated warehouse systems, using artificial intelligence (AI) in its software.

Its robotic solutions improve efficiency and productivity for customers like Albertsons and Target, as well as Walmart. They can handle many tasks, including picking and packing, and the stacking and unstacking of goods onto pallets. This is all controlled by a warehouse management software system.

If that sounds familiar to Ocado, it is in some ways. But what I like here is that Symbotic doesn’t have a low-margin grocery business as its bread and butter. It’s a pure-play automation company.

And unlike Ocado, its overall business is growing rapidly and may turn profitable much sooner.

Very strong progress

In its fiscal second quarter, which ended 30 March, the company’s revenue surged 59% year on year to $424m, topping analysts’ estimates.

And while it’s understandably still prioritising growth over profit right now, it did post an adjusted EBITDA of $22m, versus an EBITDA loss of $55m in the equivalent period last year. So it’s encouraging to see progress towards profitability being made.

Management said: “We started three system deployments and completed three operational systems, while achieving faster revenue growth, higher margins and stronger cash generation than planned for the quarter.”

For the current third quarter, the company expects revenue of $450m-$470m and adjusted EBITDA of $27m-$29m. For context, revenue was $176m, with an adjusted EBITDA loss of $22m, in the equivalent quarter just two years ago.

The stock is up around 300% since June 2022. However, it still looks reasonably valued on a forward price-to-sales (P/S) multiple of around 1.7. And brokers forecast actual profits in the next two years.

Risks to consider

Symbotic has only been a public company since 2022 and is still unprofitable. There have been countless high-growth companies that have come to market looking like the real deal before falling apart. Peloton Interactive is a recent example.

So the risk here is that the firm never translates growth into sustainable bottom-line profits for shareholders. It recorded a net loss of $41m in Q2 and robotics remains a capital-intensive industry.

On the other hand, the global warehouse automation market opportunity is enormous. It’s expected to reach $71bn by 2032, up from $16.2bn in 2022, according to Precedence Research. Symbotic and Softbank put it much higher, naturally.

This growth will be driven by further adoption of e-commerce, advances in AI technology, and rising labour costs and shortages that make automation a more attractive option for companies.

The growth of warehouse automation seems almost inevitable to me. After all, robots require maintenance, but they don’t need sleep or dinner breaks. They don’t ask for higher pay or occasionally ring in sick.

As an innovator, Symbotic could capture significant market share as the industry grows. If it achieves its full potential, I imagine its value will soar.

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