Why Is Intuitive Surgical’s Stock Trading At An All Time High Despite The Brexit?

July 14th, 2016 by Trefis Team
-3.05%
Downside
366
Market
355
Trefis
ISRG: Intuitive Surgical logo
ISRG
Intuitive Surgical

Though a large number of stocks have slipped after the announcement of Brexit, Intuitive Surgical  (NYSE:ISRG) seems to have been so far immune to the news. On the contrary, in the number of days once the Brexit announcement, the company’s stock has traded around an all time high of $677.84, just above the price at which it was trading before June 23rd – the date of referendum.

We can attribute this to the fact that Intuitive’s installed base of daVinci system is largely in the U.S.; and Europe constitutes a very small percentage of its customer base. Overall, only 12% of Intuitive’s installed base is in the Europe as compared to 77% in the U.S. It is worth noting this figure because the demand for Intuitive’s instruments and accessories, which constituted over 50% of its revenues in 2015, comes from its existing installed base. A slowdown in the U.S. would have had an adverse impact on the company’s stock as compared to a slowdown in Europe. Region_Wise

Source: Intuitive’s 2015 10-k filing

From recent conference calls with Intuitive Surgical management, we can deduce that one of the key priorities of the company is to increasingly market its daVinci systems internationally to spur growth. Looking from this perspective, it seems that Intuitive’s growth in procedures from Europe could be affected in case of a possible slowdown  in the region. However, since the company doesn’t disclose the procedural growth geographically, it would be difficult to estimate the exact impact.

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Further, according to reports, lobbyists of Brexit had previously told voters that in case of Brexit, Britain would use the amount of $470 million each week, which it currently allegedly transfers to Europe, on the national health care system. Intuitive could be largely benefited, if such a scenario were to occur. Given that there have been concerns related to the efficacy of da Vinci surgical systems relative to standard surgery, due its high cost, an increase in spending budget for hospitals can result in an increase in the demand for Intuitive’s daVinci systems.

Notes:

1) If you like or have any questions about our analysis, please write us back at content@trefis.com. We hope such lean communication sparks thinking, and encourages you to ask questions. The purpose of these analyses is to help you focus only on a few important things.
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Intutitive Surgical

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