Intuitive Surgical is Wednesday's IBD Stock Of The Day. ISRG stock is rising as Wall Street awaits news about the company's next robotic surgery system.
The company has already said it doesn't plan to launch a new system in 2023. But that doesn't mean 2024 is off the table, UBS analyst Danielle Antalffy said in a note to clients.
Meanwhile, a recent survey suggests robotic surgery adoption will ramp through next year, though that comes amid slower capital expenditure spending at hospitals.
Overall, "Intuitive Surgical's fundamentals are strong and we see sustainable double-digit growth ahead," Antalffy said.
On today's stock market, ISRG stock added 1.3% to close at 257.99.
ISRG Stock Is Consolidating
Shares of Intuitive Surgical are consolidating with a buy point at 285.19, MarketSmith.com shows. But ISRG stock also is forming a handle with an entry at 259.12.
Recent rumors suggest Intuitive Surgical could be nearing a next-generation robotic surgery system, adding to its bread-and-butter da Vinci. Last month, the Federal Communications Commission — which inspects robotics — gave Intuitive Surgical the go-ahead for an unnamed piece of equipment. The company then asked that the user manual be removed from public inspection.
"The user manual noted that the system components included a console, a robot and a tower (as in, this is a full system)," Evercore ISI analyst Vijay Kumar said in a recent report on ISRG stock. "Historically, the FCC approved the da Vinci Xi in November 2013 prior to Food and Drug Administration approval in early 2014."
If Intuitive Surgical is nailing down the final details of a next-generation robotic surgery system, the company will have to run clinical studies, Kumar said. This puts the timeline for approval in 2024.
ISRG stock jumped nearly 5% on March 24, the day of the FCC move.
Tough Macro Factors
Antalffy, the UBS analyst, is a believer in the 2024 timeline.
"This would help adoption and fuel systems sales as hospitals look to upgrade to the newest generation system," she said.
But she lowered her rating on ISRG stock to neutral and cut her price target to 278 from 320.
There are numerous macro challenges including slowing spending from hospitals. Further, other firms like Medtronic, Johnson & Johnson and privately held CMR Surgical could enter the ring. It's important to note though that J&J just eliminated about 350 jobs, many of which were in its robotic surgery unit.
"With what we see as prolonged or delayed purchasing cycles in this tough macroeconomic environment, where competition is ramping, we don't see a clear view into estimate upside," Antalffy said. "With shares trading at such a meaningful premium to the large-cap medtech group, we see limited room for multiple expansion in the near-term."
ISRG stock analysts expect the company to be solidly profitable in the next several years. This year, the analysts surveyed by FactSet expect adjusted earnings of $5.30 per share, growing 13%. They expect sales to increase 11% to $6.9 billion. In 2024, the Street calls for 17% and 13% growth, respectively, for earnings and sales.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
