Artificial intelligence (AI), which has been the talk of the town in investing circles lately, is poised to reach $1.8 trillion in market size by the end of the decade. It is catalyzing major transformations across various business sectors. But it is not just semiconductor and software firms hogging the limelight – plenty of companies in other industries are cashing in on AI's potential too. Winslow Capital Management’s CEO and CIO, Justin Kelly, hinted that beyond the apparent winners, there could be other companies benefiting from AI – those using the technology to outshine competitors, even if they are not traditional tech firms.
Once limited to sci-fi movies, AI-driven robotics – a market anticipated to reach $214.6 billion by 2030 – is revolutionizing healthcare, boosting accuracy and efficiency. Intuitive Surgical, Inc. (ISRG) stands out in the field, crafting surgical robots for over two decades, and is now leading the charge in the minimally invasive surgery (MIS) market by actively incorporating AI.
Kelly said, "We see the innovation enabled by AI and Intuitive Surgical to do two things: one, distance themselves from the competition and two, expand the opportunity for robotic surgery. We think this company is set up for a tremendous growth cycle over the next three years."
Let’s take a closer look.
About Intuitive Surgical Stock
Founded in 1995, Sunnyvale, California-headquartered Intuitive Surgical, Inc. (ISRG) is the leading provider of robotic-assisted surgical systems, instruments, and accessories used in procedures, such as gynecological, urological, general, colorectal, and head and neck surgeries. Its market cap currently stands at $135.3 billion.
Notably, the medical equipment maker’s robotic da Vinci Surgical System assists surgeons’ precision and control during MIS, while the Ion procedure is a robot-assisted biopsy. Intuitive Surgical is also harnessing the power of big data analytics and AI to create transformative tools, like real-time guidance for surgeons or enhanced training modalities, that are poised to revolutionize medicine.
Shares of Intuitive Surgical have surged 13.3% on a YTD basis, surpassing the broader S&P 500 Index’s ($SPX) gain of 8.3% and the S&P 500 Healthcare Sector SPDR’s (XLV) modest 3.5% returns over the same time frame. Moreover, ISRG’s surge outshines the tech-heavy Nasdaq Composite’s ($NASX) 8.6% returns on a YTD basis.
Priced at 78.74 times forward earnings and 18.80 times sales, the stock trades higher than the healthcare equipment industry median, but roughly in line with its own five-year averages.
Intuitive Surgical’s Strong Q1 Beats Wall Street Projections
On April 18, the company reported its Q1 earnings results, which surpassed Wall Street’s projections on both the top and bottom lines. Its total revenue of $1.9 billion rose 11.4% year over year, boosted by Intuitive Surgical’s instruments and accessories business - primarily due to 16% da Vinci procedure volume growth, 90% Ion procedure volume growth, and favorable pricing. Non-GAAP EPS jumped 22% year over year to $1.50 per share, topping analyst estimates by about 6%.
It is also worth noting that during the quarter, Intuitive introduced new surgical systems, including the FDA-approved da Vinci 5, representing the latest advancement in its technology lineup. The company is ramping up its efforts by upgrading the robot with AI technology, increasing its computing power tenfold. Surgeons could receive significantly improved real-time feedback during surgeries. By the end of the quarter, eight of the cutting-edge systems had been placed.
Analysts tracking Intuitive Surgical expect the company’s profit to reach $4.80 per share in fiscal 2024, up 18.5% year over year, and grow another 20% to $5.76 per share in fiscal 2025.
What Do Analysts Expect for Intuitive Surgical Stock?
Intuitive Surgical stock has a consensus “Moderate Buy” rating. Out of the 22 analysts offering recommendations for the stock, 13 advise a “Strong Buy,” two suggest a “Moderate Buy,” and the remaining seven give a “Hold” rating.
The average analyst price target for the stock is $419, indicating a modest potential upside of 9.4% from current price levels. However, the Street-high price target of $475, raised by Bernstein from $460 last month, suggests a 24% upside potential.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
