Stifel Lays Outs The Bull Case For Intuitive Surgical

Stifel analyst Rick Wise released a note upgrading Intuitive Surgical Inc. ISRG from hold to buy and assigned a price target of $600. Wise believes that “the next leg of the ISRG story is starting to take shape” in response to the company’s recently released earnings report.

There are several factors that are leading to these beliefs. 1) Procedure volumes appear to be recovering. 2) New product launches. 3) Future product launches are coming. 4) Intuitive Surgical Inc. is expanding geographically. 5) Expansions in global sales and marketing organization.

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While second quarter appeared to be strong, Wise does denote that 2014 is a transition year with challenges still remaining. These include ongoing capital spending, uncertainties involving the product cycle and the benign gynecological surgical market.

Sales growth and earning power is key to stock price appreciation. Wise speculates “over the next 3-5 years, ISRG sales can grow sustainably at a 10% or better pace, and that EPS can grow 15-20%”. He believes that the stock is under-earning relative to the company’s normalized earning power. If the re-acceleration thesis proves correct, Wise expects the stock to have an above-average multiple and to reach its $600 price target.

Shares in the pre-market were trading up 12.71 percent at $442.00 on Wednesday, July 23.