Insights

Why Intuitive Surgical Stock Dropped 20.7% in April

What happened
Shares of Intuitive Surgical (NASDAQ: ISRG) sank 20.7% in April, according to S&P Global Market Intelligence. This is more than double the losses of the broad S&P 500 Index, which sank 8.8% last month. The robotic surgery company and maker of the Da Vinci surgical system reported its first-quarter earnings, which caused its stock to drop.
So what
On April 21, Intuitive Surgical reported earnings for the first three months of 2022. Revenue was up 15% to $1.49 billion, and non-GAAP (adjusted) earnings per share (EPS) came in at $1.13 for the period. This growth came from an increase in procedures and Da Vinci product sales. Da Vinci procedures were up 19% year over year around the world, and its install base hit 6,920 systems, up 13% year over year.
Image source: Getty Images.

With this solid growth, you might have expected Intuitive Surgical’s stock to be up in the days following the results. But the stock was actually down more than 10% and is now down 35% this year. Why? Because management gave out weak guidance on the Q1 conference call. According to the executive team, patients are still delaying elective surgeries (which Intuitive Surgical specializes in) around the globe because of the COVID-19 pandemic. This will negatively impact Intuitive’s procedure and systems growth rate until the pandemic is over.
It is also possible that Intuitive stock has been beaten down because of the high valuation it sported coming into 2022. At the start of the year, the stock had a price-to-earnings ratio (P/E) above 60. Many growth stocks valued like Intuitive Surgical have gotten sold off lately over concerns about inflation, rising interest rates, and a potential recession. 
Now what
While it has hurt to own Intuitive Surgical stock this year, its long-term performance has been fantastic. The stock is up over 11,000% since its IPO in the early 2000s, and it has grown revenue per share by over 6,000% over the same time frame. How? Because of the steady growth of the robotics surgery market, which has increased demand for the Da Vinci robotic system and its services around the world.
And the great news is, this trend is set to continue. Analysts expect the robotic surgery market to grow at a 20% annual rate through 2025 and reach a value of $13 billion. Intuitive Surgical, a leader in the space, should continue to benefit from this tailwind, driving its financial (and stock) performance over the long haul. 
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool has a disclosure policy. –

What happened

Shares of Intuitive Surgical (NASDAQ: ISRG) sank 20.7% in April, according to S&P Global Market Intelligence. This is more than double the losses of the broad S&P 500 Index, which sank 8.8% last month. The robotic surgery company and maker of the Da Vinci surgical system reported its first-quarter earnings, which caused its stock to drop.

So what

On April 21, Intuitive Surgical reported earnings for the first three months of 2022. Revenue was up 15% to $1.49 billion, and non-GAAP (adjusted) earnings per share (EPS) came in at $1.13 for the period. This growth came from an increase in procedures and Da Vinci product sales. Da Vinci procedures were up 19% year over year around the world, and its install base hit 6,920 systems, up 13% year over year.

Image source: Getty Images.

With this solid growth, you might have expected Intuitive Surgical’s stock to be up in the days following the results. But the stock was actually down more than 10% and is now down 35% this year. Why? Because management gave out weak guidance on the Q1 conference call. According to the executive team, patients are still delaying elective surgeries (which Intuitive Surgical specializes in) around the globe because of the COVID-19 pandemic. This will negatively impact Intuitive’s procedure and systems growth rate until the pandemic is over.

It is also possible that Intuitive stock has been beaten down because of the high valuation it sported coming into 2022. At the start of the year, the stock had a price-to-earnings ratio (P/E) above 60. Many growth stocks valued like Intuitive Surgical have gotten sold off lately over concerns about inflation, rising interest rates, and a potential recession. 

Now what

While it has hurt to own Intuitive Surgical stock this year, its long-term performance has been fantastic. The stock is up over 11,000% since its IPO in the early 2000s, and it has grown revenue per share by over 6,000% over the same time frame. How? Because of the steady growth of the robotics surgery market, which has increased demand for the Da Vinci robotic system and its services around the world.

And the great news is, this trend is set to continue. Analysts expect the robotic surgery market to grow at a 20% annual rate through 2025 and reach a value of $13 billion. Intuitive Surgical, a leader in the space, should continue to benefit from this tailwind, driving its financial (and stock) performance over the long haul. 

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool has a disclosure policy.

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