Saturday, October 17, 2020

Intuitive Surgical Delivers A Beat, But Procedure Recoveries Seem To Be Lagging

Like Johnson & Johnson (JNJ), Intuitive Surgical (ISRG) bested sell-side expectations for the third quarter, but it wasn't a completely clean beat, as I expect analysts and investors to continue fretting about the pace of the volume recovery in elective/non-emergent procedures. While the long-term outlook for further penetration of robot-assisted surgery is positive, those procedure counts and hospital capital budgets in 2021 could present some near-term risks.

Intuitive Surgical is one of those stocks that trades beyond any rational discussion of valuation. It's basically the only game in town in robotic surgery (excluding orthopedics), and while that will change over time, I expect Intuitive to remain the dominant player in the market. With that, I see double-digit long-term revenue growth as attainable, as well as adjusted FCF margins close to 30%. With the shares well ahead of med-tech valuation norms, the value proposition really comes down to how much you want to pay for a company that will likely have more than 50% share in an addressable market that could reach $18 billion by the end of the decade.

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Intuitive Surgical Delivers A Beat, But Procedure Recoveries Seem To Be Lagging

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