Is there a robot in the house?
When you hear the name da Vinci, you'll probably think of the artist and scientist who gave the world the "Mona Lisa," "The Last Supper" and plans for the ornithopter flying machine to name just a few of his many achievements.
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Or maybe you'll think of the Tom Hanks movie.
But you're not likely to associate the da Vinci handle with surgery —unless you've been following Intuitive Surgical (ISRG) .
The biotech company, which was founded in 1995, specializes in robotic-assisted surgery, most notably the da Vinci surgical systems, which use a minimally invasive approach. The name comes from the original da Vinci's study of human anatomy.
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Intuitive Surgical shares have been flying higher than da Vinci's ornithopter, rising nearly 45% year-to-date and 79% from a year ago.
Intuitive Surgical
Now, the idea of robotic surgery might inspire some people to shout "oh, hell, no," and run screaming out of the operating room in their underwear. But it's catching on.
A report last year by the American College of Surgeons said that “overall use of robotic surgery has grown significantly over the past 25 years.”
Intuitive Surgical sees growth in da Vinci systems
"Growing acceptance of robotic surgery may be due largely to its apparent benefits to patients, surgeons and hospital systems," the report said.
"Robotic surgery enables some procedures to be converted from open to laparoscopic, which often means less discomfort, less bleeding, less time in the hospital, and faster recovery periods for patients," the study said.
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The report noted that robotic surgery may help enhance performance and provide ergonomic benefits, such as enabling the surgeon to sit rather than stand during a long procedure.
For hospital systems, the study said, robotic surgery can reduce costs through shorter hospital stays and fewer complications, and it might help offset the strains of the hospital workforce shortage.
The study also said that “an indicator of growth in this industry could be the number of companies now offering robotic surgery systems.”
While Intuitive Surgical was once “the only game in town,” the ACS report said, the company’s competitors now include such companies as Medtronic (MDT) , Johnson & Johnson (JNJ) , CMR Surgical and Medicaroid.
In July, ISRG beat Wall Street’s second-quarter forecasts, posting adjusted earnings of $1.46 a share. Revenue totaled $2.01 billion, up 14.5% from a year earlier.
The company said worldwide procedures with its da Vinci system rose 17%, and it placed 341 in medical facilities, 10 more than a year earlier, which the company said reflected the return of patients post pandemic.
At the end of June, Intuitive Surgical had a total of 9,203 systems in use, a 14% gain from the end of the first half of 2023.
Intuitive Surgical is scheduled to report third-quarter earnings on Oct. 17, and investment firms have been updating their price targets for the company's shares.
Analyst sees path to faster revenue growth at ISRG
Truist boosted the firm's price target on Intuitive Surgical to $570 from $520 and maintained a buy rating on the shares as part of a broader research note previewing third-quarter results for the medical-technology sector, TheFly reported.
While the firm says that any hurricane-related headwind callouts for the fourth quarter will generally get "a pass" from investors, it could cause companies with elective- or deferrable-procedure areas to see more muted guidance increases, the firm said.
For the stock, Truist contends that it deserves a premium multiple more toward the upper-end of its historical range. That's given sustained, elevated growth in procedures and a new product cycle now close in hand with the potential to drive faster and significant revenue and EPS growth, the firm said.
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Raymond James raised its price target on Intuitive Surgical to $540 from $500 and affirmed an outperform rating on the shares.
The investment firm sees a path to accelerating revenue growth over the next two years with the launch of da Vinci 5, and it expects placements of the system to track above plan, the analyst says.
Raymond James said that the measured rollout and the focus on greenfield placements should help provide upside to the firm's current procedure-growth estimates.
A greenfield placement is a procedure to insert greenfield filters into the inferior vena cava vein to prevent pulmonary embolisms.
BTIG analyst Ryan Zimmerman raised its price target on Intuitive Surgical to $518 from $494 and reiterated a buy rating on the shares as part of its broader review of medical technology.
The sector had "solid returns" as Providers outperformed among health-care subsectors for the iShares U.S. Healthcare Providers ETF (IHF) , the analyst said. The results are largely in line with fundamental feedback during the third quarter as procedure volumes have been healthy and demand is strong, the analyst said.
Channel checks in many subsectors also point to sustained procedure demand continuing into 2025 as demographics and low unemployment provide support, the analyst added.
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