Intuitive Surgical Well-Positioned For Shift To Robotic Procedures, Piper Jaffray Says In Upgrade

Robotic surgery device manufacturer Intuitive Surgical, Inc. ISRG reports third-quarter earnings Oct. 18. Piper Jaffray outlined the results of a physician survey in an upgrade note issued ahead of the print. 

The Analyst

Analyst JP McKim upgraded Intuitive Surgical from Neutral to Overweight and raised the price target from $540 to $600.

The Thesis

Procedures such as general surgery and bariatric surgery will likely be completely different in the next five years — and Intuitive Surgical is best-positioned for the shift to robotic surgery, McKim said in the upgrade note. (See the analyst's track record here.) 

Piper Jaffray surveyed doctors practicing in specialties such as oncology, endocrinology, ophthalmology and cardiology on the adoption of robotic surgery.

“Both the physicians and moreso their patients view robotic surgery as better than traditional approaches. They expect robotic surgery in 10 years to penetrate half of the inpatient surgical procedures in the United States," the analyst said.

The doctors see bariatric, thyroid, gallbladder, colon, small bowel, hernia, and lung as being top applications for robotic procedures, with limited interest in pharynx, liver, heart, stomach and brain, McKim said. 

Intuitive Surgical's product upgrades this year have been strong and may demonstrate the early stages of an upgrade cycle, McKim said.

“Strategically, getting as many customers to the fourth-generation systems is prudent ahead of additional competition likely coming in 2020 from the larger players.”

Price Action

Intuitive Surgical shares were down 2.58 percent at $517.51 at the time of publication Wednesday. 

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