Key Takeaways
- GuardCap Asset Management, which manages $5.9 billion, opened a new Intuitive Surgical position in the third quarter: 167,863 shares worth $68 million, 4.7% of its 13F stocks.
- Intuitive Surgical’s U.S. da Vinci procedure growth slowed to 10% in the third quarter, the lowest since COVID, and the stock sits 27% below its 52-week high.
- The stock trades at 37x forward earnings against a five-year average of 54x, while analysts expect normalized EPS to rise from $8.93 in 2025 to $14.04 by 2028.
- The numbers support GuardCap’s bet, and U.S. procedure growth in the fourth-quarter report is the figure to watch.
Intuitive Surgical (ISRG) spent the summer as one of the market’s punching bags. Growth slowed in its core U.S. business, and the stock fell to a 52-week low in July.
But GuardCap Asset Management, which manages $5.9 billion, ended the third quarter with a brand-new position in the stock. That’s according to its 13F for the quarter ended Sept. 30, filed Nov. 6.
GuardCap went straight to a 4.7% stake
The filing shows 167,863 shares worth $68 million at Sept. 30. That’s 4.7% of the $1.47 billion of US stocks in GuardCap’s 13F, its 11th-largest of only 19 positions. It’s also the fund’s biggest new or added position of the quarter. A 13F only shows what a fund held on the quarter’s last day, so we don’t know when GuardCap bought or what it paid. Since then, Intuitive Surgical’s stock is up 8% from its Sept. 30 price.
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Slower U.S. growth knocked the stock down
The trouble started with Intuitive’s second-quarter report on July 16. U.S. da Vinci procedure growth slowed to 12%, from 14% in the first quarter. Management blamed part of that on changes to Affordable Care Act subsidies. It kept its forecast of 13.5% to 15.5% worldwide da Vinci procedure growth for the year but said to expect the middle of that range, and the stock fell 11% the next day.
The third-quarter report on Oct. 20 brought more of the same. Revenue grew 22%, and worldwide da Vinci procedures rose 14%, including 20% growth outside the US. But U.S. da Vinci growth slowed to 10%, which management called the lowest it has seen since COVID. Intuitive also narrowed its full-year procedure forecast to 14% to 15%. It also plans to cut its instrument and accessory revenue per da Vinci procedure by 3% to 5% to win more high-volume benign surgeries, and the stock sank on the report.
Hospitals kept buying, though. Intuitive placed 546 da Vinci systems in the third quarter, up from 427 a year earlier.
Is 37x forward earnings cheap for Intuitive Surgical?
Even after the slowdown, analysts expect normalized EPS to climb from $8.93 in fiscal 2025 to $11.25 this year and $14.04 by 2028:
Growth slows in 2027, when EPS is expected to reach $12.47. Even so, these estimates call for double-digit growth every year through 2028, and they date from Nov. 10, three weeks after the October report.
Investors are paying far less for those earnings than they used to. Intuitive Surgical trades at 37x forward earnings, against a five-year average of 54x and a peak of 81x in January 2025:
Its five-year low, 30x, came on July 23, the same day the stock bottomed.
Analysts have trimmed their expectations, too. The consensus price target fell from $593 a year ago to $487 today:
That still leaves 11% upside from the latest close, with the 34 analysts’ targets ranging from $324 to $685. And reaching $487 doesn’t require a return to the old valuation: at that price, the stock would still trade well below its 54x average on forward earnings.
GuardCap looks right on this one
Intuitive’s U.S. business is slowing, and the instrument price cuts will cost it revenue per procedure before they win it more procedures. If U.S. growth keeps sliding from 10%, 37x won’t look cheap for long.
Still, I think GuardCap made a good call. Investors are paying close to the least they have in five years for Intuitive’s earnings, while analysts expect those earnings to grow at double digits through 2028. With growth outside the US at 20% and hospitals buying more da Vinci systems than a year ago, I see a business that’s far from stalled.
The next test is Intuitive’s fourth-quarter report early next year, and what it says about U.S. procedure growth in 2027. GuardCap’s next 13F, due in mid-February, will show whether it added to the bet.
So what is Intuitive Surgical stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
