Intuitive Surgical's Q2 Performance Lauded By Bullish Analysts

Robotic surgical system manufacturer Intuitive Surgical, Inc. ISRG reported above-consensus second-quarter results Thursday.

The Analysts

Canaccord Genuity analyst Jason Mills maintained a Buy rating on Intuitive Surgical and lifted the price target from $575 to $610.

Stifel analyst Rick Wise rates the shares a Buy, with a $570 price target.

Morgan Stanley analyst David Lewis reiterated an Overweight rating and $620 price target.

Cantor Fitzgerald analyst Craig Bijou reiterated an Overweight rating and $620 price target.

Raymond James analyst Lawrence Keusch maintained an Outperform rating and $610 price target.

Cannacord Recommends Adding To Positions

Intuitive's top-line and bottom-line upside in the second quarter was achieved on the back of strong procedure growth, aided by an expanding geographic and procedure footprint, Mills said in a Thursday note.

The company narrowed its procedure growth guidance range from 15-17% to 16-17%, the analyst said.

The strong underlying trends support a bullish view on the stock, he said.

Mills said he expects the double-digit procedure growth to be sustained for several years to come.

Cannacord recommends adding to positions in the stock, attributing the positive stance to expected strong business trends in the form of robust procedure growth; expanding demand for systems; and strong revenue per procedure.

Stifel: Procedure Growth Guidance Could Prove Conservative

Intuitive's higher procedure growth guidance is more modest than many previous guidance revisions, setting the company up for a second-half volume deceleration, Wise said in a Thursday note.

Many previous guidance hikes proved to be conservative, the analyst said.

Stifel predicted a negative stock reaction to the earnings report, as the company suggested hernia and colorectal procedure growth moderated despite overall healthy demand — while also suggesting operating expenditure investment will potentially limit EPS upside.

Wise sees these investments as measures to support broader new platform, commercialization, development/clinical initiatives and the building of global scale.

Morgan Stanley Eyes Competitive Pressure

Competitive concerns have weighed on stock performance since the first quarter, Lewis said in a Friday note.

Johnson & Johnson JNJ's recent updates suggest a delay in its Verb system of about 18-24 months, and Medtronic PLC MDT's likely to issue its next update in the fall, the analyst said.

"We continue to believe the technology gap between Medtronic Gen 1 and Intuitive's ecosystems and pipeline is much wider than consensus appreciates."

Morgan Stanley expects the overhang to persist, with volatility likely to create attractive entry points.

The average price of $477 at which the company repurchased $200 million worth of shares suggests a valuation floor for the stock, improving the risk-reward profile, Lewis said.

Cantor Confident In Intuitive's Fundamentals

The premium Intuitive shares enjoy relative to peers is justified given its top-line growth profile, the building momentum of robotic surgery and a pipeline that can significantly expand its addressable market, Bijou said in a Thursday note.

The analyst raised his 2019 and 2020 EPS and revenue estimates for Intuitive.

"We remain confident in ISRG's underlying fundamentals and momentum and maintain our longterm positive view on ISRG, anchored by the long-term growth potential of SP and ION."

RayJay: 'We Remain Constructive'

Solid underlying system placements were somewhat obscured by operating leases, Keusch said in a Friday note.

The analyst said he is supportive of flexible financing options given the increased visibility of future cash flows.

Keusch also pointed to the better-than-expected procedure growth and capital placements, both of which are considered important metrics.

"We remain constructive on ISRG shares, given a multi-year new product cycle, geographic expansion, and robotic surgery moving into mainstream adoption, plus significant balance sheet optionality with a $5B in net cash position."

Although investors are concerned about competition in 2020, Raymond James said it is already discounted in the stock. The firm said it would buy the stock following the robust second-quarter performance.