On Tuesday, Mizuho (NYSE:MFG) Securities adjusted its outlook on shares of Intuitive Surgical (NASDAQ:ISRG), a leader in surgical robotics with a market capitalization of $193 billion, by increasing its price target on the company's shares to $570 from $550, while retaining a Neutral stance.
The revision reflects the firm's anticipation of the potential market impact from the upcoming launch of Intuitive Surgical's new DV5 surgical robot system. The company's stock has shown remarkable strength, delivering a 60.66% return year-to-date and trading near its 52-week high.
According to InvestingPro, which offers comprehensive analysis of 1,400+ stocks, the company currently appears overvalued based on its proprietary Fair Value model.
The analysis by Mizhuo draws parallels to the company's earlier Xi system rollout in 2014, which saw approximately 1.1k systems deployed within the initial three years. Based on an average selling price (ASP) of $2 million per system, the firm projects a capital opportunity totaling around $2.3 billion.
However, it notes that leasing arrangements could spread this financial impact over a more extended period. InvestingPro data reveals that Intuitive Surgical maintains excellent financial health with a score of 3.14 (GREAT), supported by strong liquidity ratios and robust profitability metrics.
Mizuho anticipates that regardless of whether hospitals choose to purchase or lease the DV5 systems, this update positions Intuitive Surgical for a potentially extended period of exceeding and elevating financial forecasts. The firm recognizes the distinct and compelling market opportunity for Intuitive Surgical but also points out that supply constraints might delay the peak adoption phase until later into 2025.
The firm also highlighted the competitive advantage Intuitive Surgical holds over peers, with scant updates on rival systems from Johnson & Johnson's Ottava and Medtronic (NYSE:MDT)'s Hugo emphasizing Intuitive Surgical's significant market lead.
Looking ahead to 2025, Mizuho expects the full-scale launch of the DV5 surgical robot to be a defining factor for Intuitive Surgical, with initial impacts on earnings and profit margins due to manufacturing inefficiencies. However, once these issues are resolved, the DV5 is anticipated to drive continued adoption of robotic systems and procedures.
In other recent news, Intuitive Surgical has been the subject of several analyst upgrades following its strong earnings report. Bernstein SocGen Group increased its price target for the company's shares to $650.00, maintaining an Outperform rating. The new target was informed by a fireside chat discussing the company's macroeconomic outlook, progress on the launch of the dV5 surgical system, and other strategic initiatives.
Morgan Stanley (NYSE:MS) also upgraded Intuitive Surgical's stock from Equalweight to Overweight, reflecting optimism about the company's long-term prospects in the healthcare robotics sector. Furthermore, Erste Group revised its rating from Hold to Buy, predicting double-digit percentage growth rates in both sales and profits for 2024 and 2025.
Intuitive Surgical reported a 17% year-over-year increase in revenue, reaching $2 billion in the third quarter, driven by an 18% rise in DaVinci procedures and robust system placements. The company also adjusted its full-year 2024 procedure growth forecast to a range of 16% to 17%.
Piper Sandler, and RBC Capital Markets have also raised their price targets following the company's strong earnings report. Despite pricing pressures in China, Intuitive Surgical is preparing for a broad launch of DaVinci 5 by mid-2025 and plans to expand the Ion system internationally, especially in China and Europe. These are the recent developments for Intuitive Surgical.
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