Today witnessed a rise in Intuitive Surgical's share price.
Intuitive Surgical's shares saw a 6% surge midday Wednesday, as reported by S&P Global Market Intelligence. The boost came after the company exceeded analyst expectations in its preliminary fourth-quarter earnings. Despite trading at a whopping 73 times next year's earnings, the market rewarded the stock for its stellar Q4 performance.
A Surprising Surge
Analysts estimated Intuitive Surgical's growth at around 14% for its last quarter of 2024. Instead, the company announced a surprising 25% increase in revenue — the fastest growth rate since 2021's post-COVID rebound and well above its typical 15% annual growth rate over the past decade.
The da Vinci 5, Intuitive Surgical's latest system, played a significant role in this impressive performance. Thanks to its launch in 2024, the company saw a 36% surge in systems revenue, or surgical robots installed. This robust growth in systems revenue bodes well for shareholders, as the company's razor-and-blade business model — involving systems with accompanying instruments, accessories, and services — should mean higher recurring revenue in the future.
The Resilient Cash Printer
Intuitive Surgical's recurring revenue makes up about 83% of its total sales. With around 10,000 da Vinci systems installed worldwide, this cash-generating machine justifies the stock's impressive valuation. As the undisputed market leader in the robot-assisted surgery industry, Intuitive Surgical boasts a wide moat that gives it a significant competitive edge.
Factors Driving Success
- da Vinci 5 Platform Success: The robust Q4 earnings performance can be linked to the successful introduction of the da Vinci 5 platform.
- Growth in Procedure Volumes: Intuitive Surgical reported an 18% increase in worldwide da Vinci procedures, and a 17% increase for the whole of 2024.
- Robotic Surgery Adoption: The demand for minimally invasive technology is driving the robotic surgery devices market, with robotic surgeries increasingly used for various operations.
- Market Dominance: Intuitive Surgical dominates the market with its expanding geographical reach and strategic acquisitions.
- Financial Performance: In Q4 2024, Intuitive Surgical reported EPS of $2.21, beating expectations by 26.3%, and revenue of $2.41 billion, a 25% year-over-year increase.
- Technological Advancements: AI and robotics are driving growth in the robotic surgery market, with AI-based surgical robots improving precision and reducing human error.
- Market Expansion and Clearances: Despite increased operating expenses and depreciation costs, Intuitive Surgical remains optimistic about its growth prospects, focusing on the full launch of the da Vinci 5 platform and regional clearances.
Intuitive Surgical's exceptional Q4 earnings performance and position as the industry leader can be attributed to these trends and factors.
Investors may see this as an opportune time to consider investing in Intuitive Surgical, given its impressive financial performance and the potential for higher recurring revenue due to its growing installed base of da Vinci systems. With the company's razor-and-blade business model, each surgical robot sold could lead to future income from instruments, accessories, and services.
In light of the da Vinci 5's success, analysts might revise their financing projections for Intuitive Surgical, taking into account the increased potential for revenue growth.
