Healthcare robotics specialist Intuitive Surgical (ISRG) has had a rough few months. Nevertheless, near-term headwinds present an excellent opportunity for long-term investors.
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Intuitive Surgical is a pioneer in robotic-assisted surgeries. Its Da Vinci system provides surgeons with a suite of capabilities, including analytical tools, software systems, and other elements to perform complex procedures with precision.
It has established its position as a leader in the robotics-surgery business with a 79.82% market share. Having said that, let’s dig deeper into ISRG stock’s positioning, and its long-term attractiveness.
Navigating the Pandemic
The coronavirus was a death knell for most businesses, and perhaps no different for Intuitive. The healthcare sector faced many problems that restricted progress in the past couple of years. Patients had to delay elective procedures, and the virus’ resurgence continued to impact surgical procedural volumes.
Moreover, labor shortages and rising inflation rates further strained healthcare providers.
Despite the challenges, the company has been posting remarkably strong results. For instance, in the first quarter, revenues rose to $1.5 billion, a 15% improvement from the prior-year period, beating analyst estimates by $60 million. Da Vinci procedures have grown by an extraordinary 19% from the first quarter of last year.
Net income margins for the first quarter came in lower at 24.6% compared to 33% in the first quarter of 2021. Adjusted earnings per share were $1.13 per share, compared to $1.17 last year.
On top of that, Intuitive has raised its forecasts for procedural growth from its prior guidance of 11%-15% to 12%-16% for the year.
The Future is Bright
Intuitive is likely to face headwinds about the pandemic for the foreseeable future. Moreover, you also have new competition creeping up in the shape of Medtronic, which could take a hefty market share away from the company. While these issues may not be that significant, Intuitive has plenty to boast about its robust business.
For starters, the pandemic isn’t going to last forever. In fact, we recently saw how Chief Medical Advisor Anthony Fauci stated that the pandemic has come to a halt in the country. There are plenty of vaccines out there, and more innovation is likely in the coming months.
Intuitive has plenty of competitive advantages, solidifying its position in the sector. A lot of it stems from its ability to innovate consistently, and the dynamics of the industry.
Developing healthcare robotics devices is a capital-intensive process that requires various enterprises to meet legal and regulatory requirements. Moreover, these systems cost millions to hospitals in just equipment expenses. If you add to that the time it takes to train medical workers, it takes costs to a whole new level.
Innovation has been a key focus of the company. Over the past decades or so, the firm has been improving its equipment and scope to support a variety of procedures.
Moreover, it has done well to protect its innovative capabilities, with over 2,100 patents filed at the close of last year. Additionally, its business model is such that it offers recurring revenue streams for the company.
Wall Street’s Take
Turning to Wall Street, ISRG stock maintains a Moderate Buy consensus rating. Out of 17 total analyst ratings, 10 Buys, six Holds, and one Sell ratings were assigned over the past three months.
The average ISRG price target is $325.44, implying 36.2% upside potential. Analyst price targets range from a low of $218 per share to a high of $395 per share.
Bottom Line On ISRG Stock
The market has come hard on several promising stocks due to headwinds impacting the world’s economy. ISRG stock is one such stock. Its fundamentals remain robust, and it’s done well to whether the problems created by the pandemic. It is in excellent shape to continue growing revenue and profits in the coming years.
I feel the pullback in ISRG stock was warranted considering how it trades at over 13 times forward sales. Shares were now down over 30% from all-time highs in December last year, and I expect them to continue dropping in line with the current market downturn.
Nevertheless, in the long-term, it remains a highly attractive bet.
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