Friday, March 09, 2007

Calls of Note Part 1

- Cowen continues to be positive on Intuitive Surgical (NASDAQ:ISRG) noting that with recent broad market weakness driving shares of ISRG down 6% from the Feb. high, the shares are trading at 28x 2008 EPS est. of $3.90 while they anticipate EPS growth of 40-45% for the next three years.

Intuitive Surgical is unique among mid-cap medical device companies due to its exceptional growth and high margins. The da Vinci surgical system has captured less than 10% of its target hospital market to-date and the firm sees penetration rising to 25% in 2009. They estimate 40% sales growth for 2007 and expect Intuitive to post results that exceed consensus throughout the year.

Da Vinci prostatectomy (80% of tot. procedure sales) share appears likely to reach 80% in three years from 35% today, with nearly 50% procedure growth in 2007. Hysterectomy volume should rise by more than 2x. They see notable upside in gastric bypass for obesity as hospitals fight for patient traffic. With an est. installed base of 600 units, including 41 hospitals with two systems and 13 hospitals with three da Vinci units, the firm perceives an enduring market presence for Intuitive that is strengthening quarterly.

Maintains Outperform rating.

Notablecalls: Nothing really new there. May create some buy interest, though. After all, it's ISRG.

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