One buy rated stock with unbreakable moat you can’t ignore
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Valued at $177 billion, Intuitive Surgery (ISRG) is the best known medical technology company for its Da Vinci surgical system. For a long time, it has dominated the robotic surgical market using Da Vinci Systems, a robotic platform that helps surgeons perform minimal invasive surgery. Its success is based on two years of ecosystems of surgeon loyalty, hospital reliance and technical advantage. During the same period, the stock returned more than 6,330%.
Advances in artificial intelligence (AI) allow us to intuitively develop systems further and solidify unbreakable moats. Let’s see if the stock is currently in purchases.
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The Intuitive’s Da Vinci System is an advanced robotic system that uses a robotic arm and a 3D high-resolution camera to enable surgeons to operate through small incisions. These minimally invasive surgeries provide fewer complications, shorter hospital stays and faster recovery times. Intuitive’s business model includes not only selling these systems, but also recurring revenue from selling system-related equipment and accessories, as well as a surgeon training program.
In the most recent second quarter, Global Da Vinci procedures increased 17% year-on-year. The company installed a 395 Da Vinci system in the Q2, including the 180 Da Vinci 5 Systems, a fifth-generation robotics system. This was released in 2024.
Despite the average selling price (ASP) of Da Vinci Systems rose from $1.44 million to $1.5 million, system revenues rose 28% due to the placement and increased demand of the company’s latest Da Vinci platform. This revealed that hospitals prioritize investing in intuitive cutting edge surgical platforms despite broader capital expenditure constraints in some global markets. Additionally, instruments and accessories revenues also rose 18% to $1.47 billion.
The quarter’s outstanding performer expanded its procedure by 88% per year on the SP (single-port) platform. This is used in limited anatomical spaces and complex cases such as colorectal and head and neck surgery where traditional multiport robotic systems may not work. In the second quarter, we had 23 intuitively placed SP systems.
Furthermore, Ion System, an intuitive robotics-assisted platform for minimally invasive lung biopsy, has increased the steps in which the base of the 905 system was installed by 52% to 35,000. Despite macroeconomic uncertainty and rising trade tensions, gross profit remained at 67.9%. The company bought back $181 million worth of shares and spent $155 million on CAPEX, but its cash reserve rose to $9.5 billion.
Looking ahead, the company intends to launch Da Vinci 5 globally. Intuitive is good for execution with a healthy balance sheet, a repetitive revenue model and strong free cash flow.
Intuitively, there is a two-year head start in the field of robotic surgery. According to GlobalData, in 2024, it intuitively held 60% of the Global Robotic Surgery market. The market, valued at $2.9 billion in 2024, is expected to reach $9.2 billion by 2034.
Bringing robotic systems to the market requires years of research and development, surgeon partnerships, billions of dollars and regulatory hurdles. Even if new participants or established players try to enter this space, they must demonstrate clinical efficacy, safety, and training scalability at an intuitive level.
The rival, with deep pockets, developed an alternative. In particular, Medtronic (MDT) with Hugo systems, Johnson & Johnson (JNJ)’s Ottava Surgical System, and Stryker (Syk)’s Mako systems have all been tried, but have not been able to gain market share. This is partly due to hospitals and surgeons trapped in the Da Vinci ecosystem, who have invested a significant amount of money to purchase these systems and train surgeons. Once trained, switching platforms is expensive and dangerous. That makes the moat very unbreakable.
In addition to Da Vinci, Intuitive has expanded its scope to respiratory, colorectal, thoracic, and neck surgery using ions, SPs, and staplers, creating a variety of models. Overall, what’s intuitive is growth stock with decades of innovation, operational excellence, and moats based on technology advantages and clinical outcomes that competitors find difficult to replicate.
Overall, on Wall Street, the intuitive inventory is “medium purchases.” Of the 28 analysts covering stocks, 18 rated “strong buys”, while two suggest “medium buys.” The average price target of $602.96 is 21% above the current level. The high price estimate of $675 means 36% upside over the next 12 months.
Despite the excellent long-term growth outlook in the unbreakable moat and robotic surgery market, ISRG shares are currently trading at a 60x advance revenue premium. Risk aversion investors can start accumulating stocks at the $400 level and invest in a safe margin.
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On the date of publication, Sushree Mohanty had no position (directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published barchart.com
