Intuitive Surgical has created a large amount of wealth for early investors, increasing from about $8/share to about $600/share over the last decade. However, the share price has dropped about 20% to below $460/share due to a couple of recent reports questioning the advantages of robotic surgery over conventional surgery.
Also, a probe by U.S Regulators to investigate the cause of incidents has also contributed to this decline. This decline has provided an opportunity for investors to get in at a very attractive price.
MarketWatch & Motley Fool: The drama keeps on coming for Intuitive Surgical Inc. as the company?s shares jumped Monday after a group of surgeons came to defend the company?s robotic devices and an analyst upgraded the pricey stock afterward.
Intuitive (ISRG) shares jumped more than 5% at one point on the ratings upgrade to buy from Canaccord Genuity?s Jason Mills.
Intuitive shares were up nearly 4% to $477.01 in recent action, a gain of $17.57 per share.
Quick nosedive, then…
Shares of Intuitive, which makes a robotic device that can help surgeons perform such routine procedures as hysterectomies, have taken a beating of late and reached a 52-week low on Friday.
That came as the American Congress of Obstetricians and Gynecologists President Dr. James Breeden questioned whether the company?s da Vinci robotic surgeon offered any added value when performing hysterectomies over conventional means.
The company?s shares also nosedived late last month when it was reported the U.S. Food and Drug Administration was scrutinizing a high number of complaints about the devices.
In his note, Mills upgraded the shares to buy from hold, noting Breeden?s complaints were countered by another group of surgeons who advocate minimally invasive procedures.
Mills noted the group said in a letter to Breeden: ?Receiving a minimally invasive surgery is without question advantageous to the patient in whom this approach is prudent. Hopefully, we can all agree on that. The question then becomes: is she being offered a minimally invasive approach? The data clearly indicates that prior to Robotic Surgery that was not the case for the majority of women.?
Mills put his price target on the stock at $527 a share. That echoed a number of other analysts, who said shares should rise even higher than that. Raymond James analyst Lawrence Keusch also cited the surgeons who defended the robotic procedures in a note that put a price target of $620 on the shares.
Motley’s The Bottom Line
Intuitive Surgical would not have gotten this far if the benefits of the da Vinci system had not been proven. There are a very large number of detailed reports that confirm the benefits and I believe that they are valid. Also, the large number of hospitals that have purchased the da Vinci systems would not make this level of investment without doing extensive research to verify the effectiveness and the benefits of the da Vinci system.
Regardless of the outcome of the investigation by U.S. Regulators, Intuitive Surgical will survive and become a stronger company. However, even one incident resulting in death is too many and if the da Vinci is proven to be the cause some of these incidents, they should and will be held liable.
If the da Vinci system is the reason for any incidents, a positive outcome would be corrective actions that result in a reduced number of incidents in the future.
Surgery is always dangerous and as with conventional surgery there will be incidents. However, Motley’s Greg Williamson believes that the da Vinci system will continue to be the safest, quickest and least painful form of surgery.