The rapid advancements in artificial intelligence (AI) and automation have led to a surge in interest in robotics stocks. However, investors should be cautious about investing in this sector in 2024. Many robotics companies are facing significant challenges that could negatively impact their performance and lead to a strong bear case for selling these stocks. This has led to my list of robotics and automation stocks to sell.
One major concern is the oversaturation of the market. As more companies enter the robotics space and competition intensifies, participants suffer reduced profit margins and slower growth rates. Additionally, many of these companies are trading at high valuations that do not reflect their underlying fundamentals, making them vulnerable to significant price corrections.
Another issue is the uncertainty surrounding the adoption of robotics technology. While there has been progress in sectors like manufacturing and healthcare, the widespread integration of robotics in consumer goods and services has been slower than anticipated.
So with that being said, here are three robotics and automation stocks to sell in May before they crash and burn.
Kardex (KRDXF)
Kardex (OTCMKTS:KRDXF) provides automated storage and retrieval systems. Despite its niche market, the company may struggle with scalability and competition from larger players. Its limited market exposure can be a significant downside risk.
In 2023, Kardex reported a net profit of 66.9 million EUR ($72.7 million), a significant 73.3% increase from the previous year. Revenue growth was driven by strong demand across its Kardex Remstar division and increased production output, with total bookings reaching 527.6 million EUR, up 3.5% from the prior year.
However, Kardex operates in a highly specialized market, which limits its scalability. The company faces competition from larger players with more extensive resources and broader market exposure. This competition can pressure Kardex’s market share and margins, particularly as larger companies may offer integrated solutions that Kardex cannot match.
Kardex’s limited market exposure is another downside risk. While the company has made strides in Europe and North America, its presence in other regions remains minimal.
All of these factors lead me to believe that KRDXF is one of those companies to avoid.
Deere (DE)
Deere (NYSE:DE) is known for its agricultural machinery. The company’s foray into autonomous tractors may not be enough to offset declining traditional equipment sales. In its latest quarterly report, Deere’s net income was $1.751 billion, reflecting a mixed performance across its segments.
For fiscal year 2024, Deere provided cautious guidance. The company expects net income to range between $8.5 billion and $9 billion, with the agricultural segment facing potential headwinds due to decreased farmer incomes and reduced demand for large agricultural machinery.
The push towards more stringent environmental regulations could impact Deere’s operations, particularly in its traditional energy-intensive manufacturing processes. Analysts have also raised concerns about the potential for increased operational costs and the need for further capital raises to fund its technological advancements. This in turn could lead to shareholder dilution or increased financial risk in general.
Intuitive Surgical (ISRG)
Intuitive Surgical (NASDAQ:ISRG) manufactures robotic surgical systems. While it has a strong market position, the company faces high competition and regulatory scrutiny. The company also anticipates higher operating expenses, projected to grow between 11% and 15% in 2024, driven by non-cash stock compensation and increased capital expenditures for facility construction.
While Intuitive Surgical maintains a dominant position in the robotic surgery market, it faces intense competition from other medical device companies developing similar technologies.
ISRG has a stranglehold over robotics for use in hospitals. However, smaller medical facilities, which are cheaper to construct and build, are far outpacing the establishment of new hospitals, which is where its competitors can erode ISRG’s market share.
The robotics surgery industry is also becoming more splintered and decentralized over time, as specific expertise, regulatory approval, and research is needed to develop robotics to perform specific functions. This gives an opening for ISGR’s competitors such as Johnson & Johnson (NYSE:JNJ) to enter the market, particularly with its Ottava surgical robot.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.