Analysts at the Bank of America (BoA) remain bullish on Intuitive Surgical (NASDAQ:ISRG) on its solid procedure growth and stabilization in its bariatrics segment, reiterating their ‘Buy’ rating on the stock following its third quarter financial results.
Investors were not impressed by the maker of robotic surgical tools’ 3Q financial performance, sending the stock tumbling on Thursday. It declined another 4.4% to US$261.26 on Friday morning.
The BoA analysts noted that Intuitive’s 3Q worldwide procedure growth of 19% beat the Street estimate of 18% but was slightly below investors’ 20% expectation.
One less selling day in the United States had a negative impact on procedure growth, resulting in a 190 basis point headwind on US procedures and a more than 100 basis point drag on worldwide procedure growth.
“Excluding the selling day, worldwide procedure growth would have been over 20% in 3Q,” they said.
System revenue missed expectations by $25 million, due to higher leases which accounted for 52% of placements in the third quarter, the analysts noted.
“Many customers are leasing more to preserve their optionality for new technology,” they pointed out.
The analysts also noted that the slowdown in bariatric surgeries could be getting closer to bottoming out, with the rate of deceleration from 2Q to 3Q slower than it was from 1Q to 2Q.
“In 2Q US bariatrics slowed to roughly 19% growth and in 3Q US bariatrics still grew double digits,” they wrote.
“ISRG's exposure to GLP-1s (a class of weight loss drugs) is more ringfenced than most with just bariatrics (4% to 5% of procedures) and the GLP-1 impact is more in the rearview mirror.”
The analysts concluded: “All in, we thought the quarter was quite solid and we reiterate our ‘Buy’ rating and $400 price objective.”
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