Over the past decade, shares of Intuitive Surgical , a niche maker of robotic surgical equipment, rose from $10 per share to the $460s. Since March 2009, the bottom of the previous bear market, shares have quadrupled. Today, with its trailing P/E at 40, shares can hardly be considered cheap, but analysts believe that with the expansion of its robotic line to other medical procedures, Intuitive Surgical may be well poised to grow exponentially. There are plenty of skeptics who are bearish on Intuitive Surgical after all, with the economy still in fragile state, are hospitals and medical facilities about to spend heavily on robotic surgeons? What separates it from the pack of “future stocks” such as solar power companies or Tesla Motors which have all been severely punished for their speculative forecasts?

Daily Chart If you are not able to see the chart, your email client probably does not support javascript. To view it, please

Intuitive Surgicals robots are cutting edge, combining the newest computer technologies with precise mechanisms designed through military research. Although its business certainly sounds irresistibly cool on paper, bears tore at the companys foundations, citing the lack of a dedicated customer base in todays economic malaise. However, strong sales of the companys Da Vinci surgical system, which allows the surgeon to perform minimally invasive procedures remotely, pacified naysayers. The Da Vinci system, which costs between $700,000 to $2.3 million, depending on the features installed, is an expensive investment for any hospital. Yet hospitals have been eager to embrace the Da Vinci system, which doesnt truly replace the doctor, but rather increases accuracy and productivity while reducing the possibility of human error and malpractice suits. The superior technology in the Da Vinci system has made it a popular replacement for comparatively inferior medical devices from industry rivals Stryker , Meditronic and Boston Scientific , and to date 1,450 Da Vinci systems have been installed.

Analysts are also excited about Intuitive Surgicals growth prospects, since until recently the companys equipment was only used for hysterectomies and prostate surgeries in the United States. Although its equipment is currently used for over a hundred other procedures worldwide, the company faces stricter regulations in the United States. Intuitive recently won approval for using its equipment in another dozen new procedures with the United States, which will generate far more revenue in 2012 than in previous years. Da Vinci is also being increasingly used for cardiac valve repair as well as gynecologic surgery. The Da Vinci surgical systems have a “bolt on” system in which peripherals can be directly added to expand their functionality. This system has been compared to the business models of Apple and Microsoft , in which the applications developed for their hardware or software greatly increase the core products value. In addition, Intuitive also earns revenue from regular maintenance costs of its Da Vinci units, similar to the way a software company earns revenue from updating to newer versions of existing software.

Many market watchers believe that the shift to robotics across the market will be inevitable, in all sectors, despite the macro outlook. Industrial robots are the lifeblood of modern assembly lines, and can perform tasks with a far higher degree of programmed accuracy than their human counterparts. Robotics technology developed for military purposes often finds its way back to civilians through start-ups, such as RE Squared, Ekso Bionics and HDT Robotics. Even construction companies such as Caterpillar and John Deere are developing their own driver-less vehicles. In the medical field, the companys competitors, Mako Surgical and iRobot , are also popular choices with robotics investors.

Although Intuitive Surgical has made some incredible gains over the past few years, it still might have legs to run. To date, the companys stock weathered and actually gained throughout the 2000-2002 dot-com crash, the 2008-2009 subprime crisis and todays European debt crisis. The reason is simple hospitals are recession-proof businesses. If times are actually improving, as recent data from the United States has shown, then hospitals might actually increase spending on robotic products, and Intuitive Surgicals increasing core competencies make it all the more attractive to customers as well as investors. For 2012, analysts on average expect the company to increase earnings by 25.2%, more than double the 11.7% for its industry peers, and to increase revenue by 17.5%.

Other News About ISRG Intuitive Surgical: First Robotic Success Of Many As Intuitive Surgical increases its portfolio of procedures, will its revenue increase accordingly? New January Stock to Buy Is Almost Science Fiction Is Intuitive Surgical the stuff of sci-fi? Other Stocks in the News Family Dollar Stores posts 8% higher profit Family Dollar posts decent earnings but shares fall off a cliff. Dont Get Too Worked Up Over PriceSmarts Earnings PriceSmart bombs earnings, but is it a buying opportunity for shrewd value investors? Copyright 2011 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Similar Posts:

Share