ISRG: 3 Reasons to be Bullish on Intuitive Surgical

Robotic surgery solutions are the wave of the future
ISRG is a leader with the da Vinci system

An incredible rise and more to go

Revenues and earnings are trending higher

Intuitive Surgical has a huge upside potential

In 2020, the technology sector of the stock market was the star performer. Many technology companies benefited from the global pandemic. Communication platforms soared as social distancing made them the only method of keeping in touch with friends, family, and business associates. Online shopping boomed as it allowed people to remain at home while ordering and receiving consumer goods and essentials. Working from home increased the need for technological solutions.

Many of the shares of companies that did best in 2020 combined solutions for consumer needs with technology.

At the start of 2021, the trend is likely to continue. Even though Intuitive Surgical (ISRG) shares have soared, the company that provides technology-based solutions for surgery and medicine could move a lot higher over the coming years. The shares closed near the $800 level on Thursday, January 21. ISRG’s market cap was below $100 billion and could have plenty of room to grow.

Robotic surgery solutions are the wave of the future

Robotic surgery, or robot-assisted surgery, allows doctors to perform many complex procedures with more precision, flexibility, and control than conventional techniques. Many robotic procedures are minimally invasive, and performed through tiny incisions, improving outcomes and patient recovery periods. A robotic surgical approach enhances a surgeon’s performance as it reduces the potential for human errors.

Robot-assisted surgery is one of many examples of how technology is improving efficiency in medicine.

ISRG is a leader with the da Vinci system

Intuitive Surgical, Inc. and its subsidiaries designs, manufactures, and markets da Vinci surgical systems and related instruments and accessories in the United States and worldwide.

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The da Vinci system includes surgeon’s consoles, patient-side carts, 3-D vision systems, da Vinci skill simulators, da Vinci integrated table motions, and Firefly fluorescence imaging products that enable surgeons in gynecological, urological, general, cardiothoracic, and head and neck procedures. The company also manufactures EndoWrist instruments, including forceps, scissors, electrocautery tools, scalpels, and many other tools that improve dexterity for surgical procedures. The Ion lung biopsy is another example of ISRG’s innovative surgical products. ISRG brings technology and medicine together.

Minimally invasive surgical techniques allow patients to return home sooner and recover quicker, improving efficiency, results and lowering the chances of post-surgical complications.

An incredible rise and more to go

ISRG shares opened at $6 in June 2000. Over the past two decades, the stock has made higher lows and higher highs. Source: Barchart

The chart shows that the most recent high was $826.81 per share in December 2020. ISRG shares closed at the $798.67 level on January 21, the day the company reported its latest earnings after the close.

While the stock has appreciated dramatically, it could have lots more upside room as technological advances in medicine will continue and the company has a leadership role in robotics.

Revenues and earnings are trending higher

ISRG has been on a growth path over the past years.

Source: Yahoo Finance

As the chart shows, from 2016 through 2019, revenues and earnings trended higher.

Source: Yahoo Finance

2020 was a challenging year for all businesses.

From Q4 2019 through Q2 2020, ISRG’s revenues declined along with earnings. The stock hit a low of $360.50 in March 2020 as many surgical procedures were delayed because of the global pandemic. However, the stock more than doubled since the March low, and revenues and earnings got back on track in Q3 2020, reversing the slump. Even though the revenue and earnings results hit a speedbump in 2020, the company continues to report earnings.

Source: Yahoo Finance

As the chart illustrates, ISRG’s EPS exceeded consensus forecasts over the past four consecutive quarters. In the challenging second quarter of 2020, the company earned $1.11 per share, 55 cents above the average projection. The market expected ISRG to earn $3.12 per share in Q4 2020. The trend of beating forecasts continued as the company reported EPS of $3.58 on January 21. However, ISRG warned that demand during the pandemic has been tepid, causing the stock to drop in the aftermarket reaching the $785 level in the aftermath of the latest earnings report.

Intuitive Surgical has a huge upside potential

Any company that marries technology with essential products and services has thrived over the past years. The trend is likely to continue. Great success with its da Vinci surgical system and its Ion system for minimally invasive peripheral lung biopsy should lead to more innovative products from ISRG over the coming years. The market cap at below $100 billion could be too low for the company on the cutting edge of surgical technology. The selloff following the latest earnings could be another buying opportunity for ISRG.

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ISRG shares fell $18.66 (-2.34%) in premarket trading Friday. Year-to-date, ISRG has declined -4.66%, versus a 2.09% rise in the benchmark S&P 500 index during the same period.

About the Author: Andrew Hecht

Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...