Stock Analysis & Ideas

ISRG Retains Its Upside Despite Muted Q2 Results, Says Analyst

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Shares of ISRG tanked by around 9% following the company’s disappointing Q2 results. However, top-rated analyst Ryan Zimmerman continues to be bullish about the stock.

Shares of Intuitive Surgical (NASDAQ: ISRG) were down 5.7% to close at $211.85 on Friday following the company’s disappointing Q2 results. Intuitive Surgical is headquartered in Sunnyvale, California, and is a developer, manufacturer, and marketer of the da Vinci surgical system. This surgical system helps doctors conduct minimally invasive, robotic-assisted surgery.

However, BTIG analyst Ryan Zimmerman remained upbeat about the stock with a Buy rating.

Intuitive Surgical’s Q2 Results

In the second quarter, ISRG generated revenues of $1.52 billion, up 4% year-over-year but missing analysts’ estimates by $38.4 million. The company’s adjusted net income also declined to $1.14 per diluted share versus $1.3 per share in the same period a year ago. These adjusted earnings per share were in line with analysts’ estimates.

Intuitive Surgical’s business is divided into two business segments: Systems and Instruments and Accessories business. ISRG’s Systems business consists of its advanced robotic systems, including the da Vinci Surgical System, while the Instruments and Accessories business consists of a “comprehensive suite of stapling, energy, and core instrumentation for our surgical systems.”

The Instruments and Accessories business comprised around 58.8% of ISRG’s total revenues, with revenues of $895 million, up 12% year-over-year. This rise in revenues was primarily driven by a 14% increase in the da Vinci procedure volume.

However, this upswing in the Instruments business was offset by the Systems business as revenues dropped 15% year-over-year to $375 million. This fall in revenues was caused by a decline in the placement of da Vinci surgical systems to 279 in Q2 versus 328 systems in the same period a year ago.

The company’s management pointed out three main reasons for the fall in placements of the da Vinci systems.

The Reason Behind the Fall in Placement of da Vinci Surgical Systems

One of the reasons was supply chain disruptions resulting in a shortage of semiconductor components, which made it difficult for ISRG to meet customer orders at the end of Q2. Another reason has been pressure on hospital CAPEX, “incentivizing customers to seek efficiency gains on existing capital before acquiring new capacity.”

Zimmerman expects that this muted capex outlook for hospitals is “likely to linger (for how long is difficult to predict), primarily within the US but potentially in Europe and likely to impact shares more than we anticipated.”

He expects that the “challenging and growing economic concerns are likely to weigh on System sales in the near-to-medium term but see strong procedure demand as an underlying barometer of ISRG’s value to hospitals.”

Weakness in ISRG Shares Likely to Persist

Zimmerman anticipates that ISRG’s shares are likely to “trade near 3-year lows (excluding March 2020)” and “would use the weakness in shares to establish longer-term positions.”

The analyst is optimistic about the “long-term potential of robotic surgery” and sees ISRG “as the clear leader in the space with a growing ecosystem around its robotic systems and strong operating leverage in outer years.” The analyst has a price target of $247 on the stock, implying an upside potential of 9.9% at the current levels.

Despite the disappointing Q2 results, Wall Street analysts continue to be bullish about the stock, with a Strong Buy consensus rating based on 10 Buys and three Holds. The average ISRG price target of $251.15 implies an upside potential of 18.5% at current levels.


Overall, analysts are positive about the long-term potential of ISRG despite the disappointing Q2 results.

Investors continue to be very positive about the stock as indicated by the TipRanks Crowd Wisdom tool. This tool indicates that the top-performing portfolios on TipRanks have increased their holding of the stock by 3.9% in the past seven days.


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