- Cowen notes shares of Intuitive Surgical (NASDAQ:ISRG) have declined significantly, falling by 18% in the past month. A combination of real and imagined events seems to have engendered fears of slower growth or lower earnings power. Firm believes that the price decline is not justified as business fundamentals are strong and likely to remain vigorous, contrary to trepidation about 2007 guidance. The threat from a recent patent suit is negligible. They maintain their positive stance on Intuitive and reiterate Outperform rating with expectations for the shares to outperform the market by 40% - 45% in the next 12 months.
Recent news accounts imply healthy sales trends for Intuitive Surgical, with unabating demand for prostatectomies, hysterectomies and new da Vinci surgical system placements in hospitals. Rising use for gastric bypass procedures to treat morbid obesity is also occurring, representing another source of growth as nearly 200,000 obesity surgeries are performed annually in the U.S. Hospitals view the system as a means for boosting competitive advantage and are publicizing new da Vinci system purchases in order to attract (or retain) patients.
Firm believes that system sales for the seasonally strong 4Q will again prove to be significantly higher than 3Q and note that in 2004 and 2005, 4Q systems sales rose by 7 and 9 units, respectively. Sales and earnings guidance for 2007 should be issued on February 1 when Intuitive reports 4Q results. Cowen believes that fears of guidance being below Street expectations are unwarranted based upon their observations of the market evolution and clinical progress for the da Vinci system.
The current forward P/E of 33x for shares of Intuitive is their lowest valuation in 3 years.
Notablecalls: Love the call but I suspect the bounce I was looking for 3 days ago (see archives) already happened yesterday. On the other hand, ISRG is a huge mover and Cowen's call is brilliant enough to turn heads. I'm going to call this one actionable after all.
Recent news accounts imply healthy sales trends for Intuitive Surgical, with unabating demand for prostatectomies, hysterectomies and new da Vinci surgical system placements in hospitals. Rising use for gastric bypass procedures to treat morbid obesity is also occurring, representing another source of growth as nearly 200,000 obesity surgeries are performed annually in the U.S. Hospitals view the system as a means for boosting competitive advantage and are publicizing new da Vinci system purchases in order to attract (or retain) patients.
Firm believes that system sales for the seasonally strong 4Q will again prove to be significantly higher than 3Q and note that in 2004 and 2005, 4Q systems sales rose by 7 and 9 units, respectively. Sales and earnings guidance for 2007 should be issued on February 1 when Intuitive reports 4Q results. Cowen believes that fears of guidance being below Street expectations are unwarranted based upon their observations of the market evolution and clinical progress for the da Vinci system.
The current forward P/E of 33x for shares of Intuitive is their lowest valuation in 3 years.
Notablecalls: Love the call but I suspect the bounce I was looking for 3 days ago (see archives) already happened yesterday. On the other hand, ISRG is a huge mover and Cowen's call is brilliant enough to turn heads. I'm going to call this one actionable after all.
1 comment:
I have been fortunate to own ISRG since $25 per share. I have stayed with it through the significant and numerous moves up and down. What I do know is this company has several things critical to a great long-term investment. E.g. 1. Monopoly - they are the only robotic surgery player in the world, period; 2. The end market opportunity is enormous - easily over 500,000 procedures per year and probably well over 1 million - radical prostatectomy, hysterectomy, gastric bypass alone account for 450,000. 3. Gross margins should remain 69%+ with >30% operating margins; 4. They have just scratched the surface in terms of penetration. 5. They gereate lots of cash and therefore can fund there continued growth and buyback stock. 6. Valuation is dirt cheap for what you get - 35% LT earnings growth for 30X a realistic 2007 EPS of $3.05. In 2008 $4+ is very achievable. All the handwringing that takes place around each quarter is absurd. Just buy the stock for your kids college fund and yourself and stop paying attention to the intraday moves.
Post a Comment