Intuitive Surgical (NASDAQ: ISRG), a fast-growing robotic surgical platform company, has seen a sharp decline of 28% in a month, while it is down a significant 39% YTD. The broader markets have also seen a sharp correction, with the S&P500 down 13% in a month. The decline in ISRG stock over the last month or so can be attributed to a sell-off in high-growth stocks due to rising concerns around inflation and rising interest rates.
Intuitive Surgical reported its Q1 results last month, with sales of $1.5 billion and earnings of $1.13 on a per share and adjusted basis, falling above the $1.4 billion and $1.08 consensus estimates, respectively. The company’s management also revised its outlook to 12% to 16% procedure volume growth for the full year 2022, compared to its earlier guidance of 11% to 15%. Although the results were upbeat, the company’s bearish commentary on the capital spending environment at the hospitals, amid inflationary headwinds and rising interest rates, didn’t sit well with the investors, weighing on its stock price.
However, we believe that ISRG stock, following the recent correction, is very attractively priced currently. Our Intuitive Surgical Valuation of $349 per share reflects a significant 55% upside from the current levels of $225. This represents a P/E multiple of 65x based on our full-year 2022 earnings estimate of $5.34 (on a per share and adjusted basis), and it is 7% above the $326 average analysts’ price estimate.
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But what about the outlook for ISRG in the near term?
Now that ISRG has seen a fall of 28% in a month, will it continue its downward trajectory, or is a rise imminent? Going by historical performance, there is a very high chance of a rise for ISRG stock over the next month. It’s a rare event for Intuitive Surgical stock to see such a large fall in a month. Of the ten instances in the last ten years that ISRG stock saw a twenty-one-day fall of 28% or more, all ten resulted in ISRG stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects a very high chance of ISRG stock rising over the next month. See our analysis of Intuitive Surgical Stock Chance of Rise for more details.
Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years’ data
- After moving 3% or more over five days, the stock rose on 52% of the occasions in the next five days.
- After moving -7% or more over ten days, the stock rose on 52% of the occasions in the next ten days.
- After moving -28% or more over a twenty-one-day period, the stock rose on 100% of the occasions in the next twenty-one days.
This pattern suggests a higher chance of a rise in ISRG stock over the next five days, the next ten days, and the next month.
Intuitive Surgical (ISRG) Stock Return (Recent) Comparison With Peers
- Five-Day Return: ISRG highest at 3.0%; BDX lowest at 0.6%
- Ten-Day Return: MDT highest at -1.7%; EW lowest at -8.7%
- Twenty-One Day Return: BDX highest at -6.2%; ISRG lowest at -28.0%
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Medtronic vs. Ferro.
|S&P 500 Return||-6%||-18%||74%|
|Trefis Multi-Strategy Portfolio||-6%||-22%||210%|
 Month-to-date and year-to-date as of 5/20/2022
 Cumulative total returns since the end of 2016