Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories. Its da Vinci Surgical System transforms the surgeon’s natural hand movements outside the body into corresponding micro-movements inside the patient’s body.
Intuitive Surgical is kind of near and dear to my heart. When I feel in love with the Stock Market back in the early 2000s. Intuitive Surgical was one of the first stocks I started to follow. I knew it had potential, but never invested in the stock and periodically just would keep my eye on their progress.
Intuitive Surgical announced earnings on Thursday of last week. They first-quarter net income of $306.5 million compared with $287.6 million a year-ago period. Revenue rose to $973.7 million from $847.5 million in the year-ago quarter. Both numbers were below Wall Street estimates, so the stock price fall 6% on Friday. 6% may not seem like a lot, but when you have a stock price above $500, 6% is a lot.
Motley Fool said not to worry about the earnings miss for based on some of the following reasons:
More customers are trading in older da Vinci systems. These trade-ins lower Intuitive’s average selling price since the company gives customers credit toward a new da Vinci. However, customers with new systems are more likely to perform higher volumes of procedures. That should increase revenue over the long run.
Intuitive Surgical CFO Marshall Mohr said that the primary reasons for increased expenses were Intuitive’s expansion outside of the U.S., investments in informatics capabilities, and beefing up infrastructure to scale the business. Higher spending for these reasons should mean short-term pain but long-term gain.
Intuitive’s recurring revenue continues to soar, up 20% year over year and now generating 77% of total revenue. The company’s innovative new technology should open up new areas of use for robotic systems. Intuitive is accelerating its efforts to expand outside the U.S.
And when you consider ships of surgical robots increase through 2025, that reoccurring revenue will on increase. Another name for reoccurring revenue is residual cashflow.
Early investors in Intuitive Surgical have been paid handsomely over the years. With more and more surgeries being down with robotics, I think this company is a gift that will keep on giving…but just at a slower pace.
The first test for price is to see if the 4 hr demand at $495 will hold.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.