Canaccord On Intuitive Surgical Following Earnings: 'Stay Buyers'

Canaccord released a new bullish note on Intuitive Surgical, Inc. ISRG after its better-than-expected quarterly results, saying the company is “shaping up to be one of the most compelling large-cap med-tech stocks in the sector.”

Analyst's Commentary

Analyst Jason Mills believes the launch of SP cart during 2017, coupled with OpEx leverage, will accelerate EPS growth back to the mid-teens at least in 2018. Mills expects 16 percent year-over-year growth.

“With a few of the aforementioned, unique, compelling new revenue drivers poised to join the party in 2019 and beyond, we think bears will find it hard to bet against the ‘Surge,’” Mills wrote in a note.

In fact, Mills said the company’s expected $80 million spending in accelerated R&D projects in 2017 as a bullish indication. The company has outlined five key investment areas: better imaging, less invasive approaches, intelligence systems, analytics in data and optimizing learning pathways.

“We see IRSG’s most promising segments along this path for growth among its (1) imaging capabilities, (2) catheter robotics/diagnostic development and (3) early molecular research for enhanced imaging purposes,” Mills highlighted.

Intuitive Surgical reiterated expectations for 2017 procedure growth in the range of 9–12 percent and sees gross margins in the range of 69–71 percent.

Rating Justification

Mills reiterated his Buy rating and $800 target price on the shares, which, at last check, rose 3.93 percent to $692.20. The $800 target price implies potential upside of about 16 percent from current levels.