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Intuitive Surgical Stock Declines 0.7% in a Month: Is It Losing Steam?
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Shares of Intuitive Surgical (ISRG - Free Report) have lost 0.7% in the past month compared with the Zacks Medical - Instruments industry’s decline of 3.4% and the broader Zacks Medical sector’s fall of 4.6%. The S&P 500 Index has returned 3.8% in the same period. ISRG stock has risen 42.5% year to date, primarily due to strong demand for its robotic surgery procedures.
The uptrend has continued so far in 2024 on improving da Vinci procedures, primarily due to promising uptake of the newly launched da Vinci 5. Moreover, increasing adoption of robot-assisted surgeries aids ISRG’s long-term prospects.
ISRG expects da Vinci 5’s advanced imaging to drive market penetration and open new targeted segments. The significant growth in ISRG’s Ion procedures shows prospects for continued top-line improvement in the upcoming quarters.
However, the Ion endoluminal system continues to face supply challenges for catheters. Moderating growth of its bariatric procedure for the past few quarters is also concerning.
Meanwhile, ISRG’s shares are trading above the 50-day moving average, indicating a bullish trend.
ISRG Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
Intuitive Surgical expects procedure volume to grow 14-17% in 2024, continuing to drive the top line higher. The demand for medical procedures rebounded in 2023 following the COVID-19 disruption. This resulted in strong growth.
Although procedure volume continues to improve, the company’s growth expectation for its procedures in fiscal 2024 is slightly below the pre-pandemic growth rate of 18% for full-year 2019. The Zacks Consensus Estimate for 2024 revenues reflects a year-over-year improvement of 13.7%.
The strong growth in procedure volume is likely to continue in the upcoming quarters due to the rising demand for da Vinci 5 on the back of its advanced features and shorter console time. The new device has covered only 10% of its targeted market, giving it enough space for growth.
Meanwhile, robotic procedures are leading to clinical and cost benefits for users, driving strong adoption. ISRG’s broad product portfolio and flexible financing options are helping the company ward off strong competition in the industry.
However, the procedure growth rate may suffer during the second half, reflecting the increased adverse impact of soft demand for bariatric procedures and increasing headwinds in Asia from prolonged physician strikes in Korea, delayed tenders and emerging domestic robotic systems in China. The company has maintained its guidance for full-year 2024.
ISRG expects gross margin in 2024 to be 68.5-69%, higher than 68% in 2023. The growth should be primarily driven by the strong uptake of da Vinci 5, improving supply challenges and realization of lower material costs. Moreover, the company lowered its operating expenses growth estimate to 10-13% from 11-15% (projected during the first-quarter earnings call).The improvement in costs and expenses will likely drive earnings higher during the second half of 2024.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $6.67 per share, indicating a 16.8% year-over-year improvement. The estimate remained stable over the past 60 days.
Stable Estimates Over 60 Days
Image Source: Zacks Investment Research
Expanding Portfolio Aids Long-term Prospects
ISRG’s expanding portfolio aids long-term prospects. The FDA clearance for da Vinci 5 and labeling revision for its da Vinci X and Xi in 2024 are likely to boost Intuitive Surgical’s business and generate additional revenues with new installations and wider procedure support. ISRG believes that broadening portfolio of da Vinci systems, combined with flexible financing options, is likely to help it win amid rising competition in the robot-assisted surgery market. The installed base of the da Vinci system grew approximately 14% year over year during the second quarter of 2024.
Apart from da Vinci systems, Intuitive Surgical launched the Ion endoluminal system in 2019, extending its commercial offering beyond surgery into diagnostic endoluminal procedures. The system received approval in Europe and South Korea in 2023. It received approval in China during the first quarter of 2024.
Per the second-quarter 2024 earnings call, the installed base of Ion modulation system grew approximately 56% year over year to 678 units. The company completed approximately 23,200 Ion procedures in the second quarter, reflecting year-over-year growth of 82%.
Challenging Market Scenario Persists
Although ISRG has a strong product portfolio with significant opportunities, the company faces huge competition from large and well-established companies, such as Johnson & Johnson (JNJ - Free Report) and Medtronic (MDT - Free Report) , which are also focused on developing robotically controlled products. These companies have strong balance sheets and commercial networks to support the development and launch of new products. This can significantly affect ISRG’s prospects.
Meanwhile, any setback to recovering catheter supply may adversely impact Ion modulation system sales. Moreover, weakness in bariatric procedures, along with challenges in China from increasing provincial robotic competition and delayed tenders affecting capital placements, is likely to have a nearly three percentage point headwind for revenues in 2024.
Rising geopolitical tension, with war raging in Middle Eastern countries and continued Russia-Ukraine war, is leading to uncertainty. Apart from these wars, China and India are having border disputes. Moreover, the fall of the government in Bangladesh is raising chaos in the Indo-Pacific region. Any escalation of these situations can hurt economic progress globally, affecting ISRG’s top and bottom-line performances.
Wrapping Up
Intuitive Surgical’s top and bottom-line performances are likely to remain strong in 2024 on the back of continued growth in the company’s da Vinci procedure volume, coupled with strong Ion procedure growth. ISRG is also increasing the pricing of procedures that should aid in 2024 sales growth. Improving procedure volume, along with better system placements and services across all markets, should drive top-line growth this year.
However, rising geopolitical tensions may lead to supply-chain challenges, driving costs higher and unfavorably impacting product sales. Although supply-chain issues are alleviating, ongoing constraints are likely to hurt device availability. Weakness in bariatric procedures and challenges in China might offset growth in the upcoming quarters.
ISRG YTD Performance
Image Source: Zacks Investment Research
ISRG currently carries Zacks Rank #3 (hold). Its style scores also don’t look quite promising. The company has a Value score of D and Momentum and Growth scores of C. ISRG’s shares seem to consolidate in a narrow range near its all-time high level. The direction of breakout from this range is likely to set the stage for its next move. Current shareholders should hold their position. They may gain from any further upside. ISRG’s stock valuation is significantly higher than its industry. Moreover, the stock is also trading above its five-year median valuation. Investors should wait for the stock to reach an attractive valuation before making an entry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Intuitive Surgical Stock Declines 0.7% in a Month: Is It Losing Steam?
Shares of Intuitive Surgical (ISRG - Free Report) have lost 0.7% in the past month compared with the Zacks Medical - Instruments industry’s decline of 3.4% and the broader Zacks Medical sector’s fall of 4.6%. The S&P 500 Index has returned 3.8% in the same period. ISRG stock has risen 42.5% year to date, primarily due to strong demand for its robotic surgery procedures.
The uptrend has continued so far in 2024 on improving da Vinci procedures, primarily due to promising uptake of the newly launched da Vinci 5. Moreover, increasing adoption of robot-assisted surgeries aids ISRG’s long-term prospects.
ISRG expects da Vinci 5’s advanced imaging to drive market penetration and open new targeted segments. The significant growth in ISRG’s Ion procedures shows prospects for continued top-line improvement in the upcoming quarters.
However, the Ion endoluminal system continues to face supply challenges for catheters. Moderating growth of its bariatric procedure for the past few quarters is also concerning.
Meanwhile, ISRG’s shares are trading above the 50-day moving average, indicating a bullish trend.
ISRG Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
Intuitive Surgical expects procedure volume to grow 14-17% in 2024, continuing to drive the top line higher. The demand for medical procedures rebounded in 2023 following the COVID-19 disruption. This resulted in strong growth.
Although procedure volume continues to improve, the company’s growth expectation for its procedures in fiscal 2024 is slightly below the pre-pandemic growth rate of 18% for full-year 2019. The Zacks Consensus Estimate for 2024 revenues reflects a year-over-year improvement of 13.7%.
The strong growth in procedure volume is likely to continue in the upcoming quarters due to the rising demand for da Vinci 5 on the back of its advanced features and shorter console time. The new device has covered only 10% of its targeted market, giving it enough space for growth.
Meanwhile, robotic procedures are leading to clinical and cost benefits for users, driving strong adoption. ISRG’s broad product portfolio and flexible financing options are helping the company ward off strong competition in the industry.
However, the procedure growth rate may suffer during the second half, reflecting the increased adverse impact of soft demand for bariatric procedures and increasing headwinds in Asia from prolonged physician strikes in Korea, delayed tenders and emerging domestic robotic systems in China. The company has maintained its guidance for full-year 2024.
ISRG expects gross margin in 2024 to be 68.5-69%, higher than 68% in 2023. The growth should be primarily driven by the strong uptake of da Vinci 5, improving supply challenges and realization of lower material costs. Moreover, the company lowered its operating expenses growth estimate to 10-13% from 11-15% (projected during the first-quarter earnings call).The improvement in costs and expenses will likely drive earnings higher during the second half of 2024.
The Zacks Consensus Estimate for 2024 earnings is currently pegged at $6.67 per share, indicating a 16.8% year-over-year improvement. The estimate remained stable over the past 60 days.
Stable Estimates Over 60 Days
Image Source: Zacks Investment Research
Expanding Portfolio Aids Long-term Prospects
ISRG’s expanding portfolio aids long-term prospects. The FDA clearance for da Vinci 5 and labeling revision for its da Vinci X and Xi in 2024 are likely to boost Intuitive Surgical’s business and generate additional revenues with new installations and wider procedure support. ISRG believes that broadening portfolio of da Vinci systems, combined with flexible financing options, is likely to help it win amid rising competition in the robot-assisted surgery market. The installed base of the da Vinci system grew approximately 14% year over year during the second quarter of 2024.
Apart from da Vinci systems, Intuitive Surgical launched the Ion endoluminal system in 2019, extending its commercial offering beyond surgery into diagnostic endoluminal procedures. The system received approval in Europe and South Korea in 2023. It received approval in China during the first quarter of 2024.
Per the second-quarter 2024 earnings call, the installed base of Ion modulation system grew approximately 56% year over year to 678 units. The company completed approximately 23,200 Ion procedures in the second quarter, reflecting year-over-year growth of 82%.
Challenging Market Scenario Persists
Although ISRG has a strong product portfolio with significant opportunities, the company faces huge competition from large and well-established companies, such as Johnson & Johnson (JNJ - Free Report) and Medtronic (MDT - Free Report) , which are also focused on developing robotically controlled products. These companies have strong balance sheets and commercial networks to support the development and launch of new products. This can significantly affect ISRG’s prospects.
Meanwhile, any setback to recovering catheter supply may adversely impact Ion modulation system sales. Moreover, weakness in bariatric procedures, along with challenges in China from increasing provincial robotic competition and delayed tenders affecting capital placements, is likely to have a nearly three percentage point headwind for revenues in 2024.
Rising geopolitical tension, with war raging in Middle Eastern countries and continued Russia-Ukraine war, is leading to uncertainty. Apart from these wars, China and India are having border disputes. Moreover, the fall of the government in Bangladesh is raising chaos in the Indo-Pacific region. Any escalation of these situations can hurt economic progress globally, affecting ISRG’s top and bottom-line performances.
Wrapping Up
Intuitive Surgical’s top and bottom-line performances are likely to remain strong in 2024 on the back of continued growth in the company’s da Vinci procedure volume, coupled with strong Ion procedure growth. ISRG is also increasing the pricing of procedures that should aid in 2024 sales growth. Improving procedure volume, along with better system placements and services across all markets, should drive top-line growth this year.
However, rising geopolitical tensions may lead to supply-chain challenges, driving costs higher and unfavorably impacting product sales. Although supply-chain issues are alleviating, ongoing constraints are likely to hurt device availability. Weakness in bariatric procedures and challenges in China might offset growth in the upcoming quarters.
ISRG YTD Performance
Image Source: Zacks Investment Research
ISRG currently carries Zacks Rank #3 (hold). Its style scores also don’t look quite promising. The company has a Value score of D and Momentum and Growth scores of C. ISRG’s shares seem to consolidate in a narrow range near its all-time high level. The direction of breakout from this range is likely to set the stage for its next move. Current shareholders should hold their position. They may gain from any further upside. ISRG’s stock valuation is significantly higher than its industry. Moreover, the stock is also trading above its five-year median valuation. Investors should wait for the stock to reach an attractive valuation before making an entry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.