More Upside for ISRG Stock?
What was once a figment of our imagination is now reality. The robotic era is fast approaching and our healthcare sector will benefit greatly. We no longer have to imagine the prospect of walking into a hospital and having a robot perform a medical procedure—and Intuitive Surgical, Inc. (NASDAQ:ISRG) stock is a leader in that field.
Intuitive Surgical produces a robot-assisted surgical system call the “Da Vinci.” It is essentially a robotic surgical tool that allows a surgeon to perform minimally invasive surgeries from a nearby ergonomic console.
While the benefits of minimally invasive surgeries are plentiful for patients, does this translate to profits for ISRG stock investors? Shares of ISRG stock have only returned 14.4% since the pick initially peaking in April 2012. However, the good news for investors is that the future looks brighter.
The following are three reasons to be bullish on Intuitive Surgical stock:
1. Superior Technology
Typical surgical procedures use large incisions, causing trauma to patients and typically resulting in longer hospital stays and recovery times. This leads to higher costs for patients and prospective healthcare providers.
The main benefit to patients from procedures using Intuitive Surgical’s Da Vinci is that surgeries are minimally invasive and precise. The platform allows the surgeon to perform procedures using small entry points and, in some cases, the use of a single entry point through the bellybutton. This practically eliminates scarring and lowers recovery time.
As well, the precision and control of the Da Vinci is undeniable. The ergonomic console provides enhanced vision from the magnified 3D high-definition (HD) images. The robotic tool can mimic the use of a hand but the surgeon has the benefits of a steadier, more versatile tool. Together, this results in increased precision and control, allowing more efficient procedures and the overall ability to perform more of them.
In the end, the surgeon, investor, and hospital benefit from reduced costs, increased revenue, and higher margins.
2. Annuity & Growth Model
Intuitive Surgical boasts an excellent business model.
Selling robotic surgery systems is not the company’s only source of revenue; it also offers service contracts and sells 65 different multiport instruments that offer surgeons versatility in choosing the appropriate tools needed for any given procedure. The service contracts and instrument sales are an ongoing revenue stream resulting from the sale of each Da Vinci unit, essentially creating an annuity.
Intuitive Surgical went through some growing pains in 2014 as growth slowed. Some of that slowing could be attributed to the negative headlines regarding the safety of the Da Vinci system. However, 2015 saw a reversal of that trend and growth has resumed in the double-digit range for ISRG stock.
In the first quarter of 2016, revenue increased 12%. Instrument and accessory revenue increased 16%, driven predominantly by procedure volume, which increased 17%. In Q1, 110 units were shipped, which was an increase of 11.1% compared to 1Q15. Double-digit growth in all segments is an impressive feat.
Growth is still primarily driven by sales in the United States, though the company is expanding overseas. This should push current growth metrics higher and an increasing growth rate should translate to rewards for investors of ISRG stock.
3. Price Performance
Shares of ISRG stock peaked in April 2012 and essentially moved sideways within a large range. The chart below depicts a large head-and-shoulders pattern that took approximately four years to form.
Chart courtesy of www.StockCharts.com
In March of this year, price action broke out above this consolidation pattern and confirmed higher prices. My initial price target for Intuitive Surgical stock is $785.00 per share based on extrapolating the head above the neckline ($225.00 + $560.00).
ISRG stock is also currently trading at new all-time highs. This means that no upside resistance exists and higher prices can prevail.
The Bottom Line on ISRG Stock
Keep a close eye on the shares of ISRG stock. The reasons for upside movements are plentiful.
This company is the future of healthcare and currently the leader in its space. Any dips to test the breakout above the head-and-shoulders pattern could produce an opportunity for interested investors (of course, due diligence is always key).
Simply put, the future is bright for Intuitive Surgical, Inc. stock.