On Friday, BTIG analyst Ryan Zimmerman updated the price target on Intuitive Surgical (NASDAQ: NASDAQ:ISRG) to $535, an increase from the previous target of $518, while maintaining a Buy rating on the stock.
This adjustment comes after Intuitive Surgical reported strong third-quarter results for the year 2024, with revenues reaching $2.038 billion, showing a 16.9% year-over-year increase, and an adjusted earnings per share (EPS) of $1.84. These figures surpassed both BTIG's and consensus estimates, which were set at $1.958 billion and $2.006 billion for revenue, and $1.53 and $1.64 for adjusted EPS, respectively.
The company's system sales exceeded Street expectations by 4.4%, and procedure volumes saw an 18% year-over-year growth, which is approximately 100 basis points above Street predictions. The growth is partially attributed to the 110-unit increase in the installed base of the Da Vinci 5 (Dv5) surgical systems, from 78 units in the second quarter to 188 units in the third quarter of 2024. The analyst noted this expansion as significantly surpassing buy-side expectations.
Additionally, Intuitive Surgical is anticipated to continue its growth trajectory with the Dv5 system, especially as it receives regulatory approvals to enter new geographic markets. The broader launch of Dv5 is expected in the second half of 2025. The firm's non-GAAP operating margins (OMs) expanded to approximately 37.0% from 35.8%, driven by robust top-line growth and improving margins.
The company's performance in the third quarter suggests that Intuitive Surgical is reaching a point of sustainable leverage, even with the possibility of slight gross margin compression in the fiscal year 2025. Zimmerman acknowledged initial concerns about the longevity of Intuitive Surgical's appeal to investors, but emphasized that the demand remains strong in what is considered a fairly healthy market environment.
In other recent news, Intuitive Surgical is experiencing several noteworthy developments. The company reported a 17% year-over-year revenue growth, slightly surpassing Street estimates, due to a 4% beat in Systems revenue and a 1.8% beat in Consumable revenue.
The medical technology company's system placements totaled around 379, 12% above Street estimates, primarily driven by the U.S. market. The company's procedure growth also increased by roughly 18%, primarily driven by general surgery in both U.S. and international markets.
Intuitive Surgical's operating leverage was highlighted, with selling, general, and administrative expenses coming in approximately 130 basis points below Evercore ISI's estimates. This contributed to an operating margin beat, and earnings per share grew around 26%.
Evercore ISI, Baird, Wells Fargo, BTIG, and RBC Capital Markets have all made adjustments to the company's stock target and ratings. Notably, Evercore ISI raised its price target on shares of Intuitive Surgical to $490, Baird increased its price target to $565, and RBC Capital raised its price target to $515.
The company has updated its guidance, now anticipating procedure growth of 16%-17%, and has reduced its operating expense growth forecast to 10%-12%.
InvestingPro Insights
Intuitive Surgical's strong performance, as highlighted in the article, is further supported by recent InvestingPro data. The company's revenue growth of 14.47% in Q2 2024 aligns with the impressive 16.9% year-over-year increase reported in Q3. This consistent growth trajectory is reflected in the stock's performance, with a remarkable 71.94% price total return over the past year.
InvestingPro Tips indicate that Intuitive Surgical is trading near its 52-week high, which corroborates the positive sentiment expressed in the analyst's upgraded price target. The company's profitability is also noteworthy, with InvestingPro data showing a robust gross profit margin of 66.86% for the last twelve months as of Q2 2024.
However, investors should note that the stock is trading at a high earnings multiple, as pointed out by one of the InvestingPro Tips. This is evident in the current P/E ratio of 79.71, which suggests that the market has high growth expectations for Intuitive Surgical.
For those interested in a deeper analysis, InvestingPro offers 13 additional tips for Intuitive Surgical, providing a more comprehensive view of the company's financial health and market position.
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