We have recently downgraded Intuitive Surgical Inc. (ISRG) to Neutral as a result of its limited upside potential to the stock at the current level. At the current price, the Intuitive stock is trading at roughly 42.9x our fiscal 2010 EPS estimate of $7.15, considerably higher than the peers’ mean P/E multiple of approximately 18.6.
Therefore, we think that Intuitive has only a restricted potential at the current level. Hence, we have downgraded the stock to “Neutral” with a target price of $320 based on a P/E of approximately 44.8x our fiscal 2010 EPS estimate of $7.15. Intuitive will report fourth quarter and full fiscal 2009 results on Jan 21, 2009, after the market closes. Good results might persuade us to reconsider our Neutral rating on the stock.
Intuitive Surgical designs, manufactures and markets the da Vinci Surgical System, which is an advanced robot-assisted surgical system used in urologic, gynecologic, cardiothoracic and general surgeries. This represents a new generation in surgery.
The da Vinci Surgical System translates the surgeon’s natural hand movements on instrument controls at a console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions, or ports.
The da Vinci Surgical System is the only technology available commercially that can provide the surgeon with intuitive control, range of motion, fine tissue manipulation capability and 3-D visualization characteristics of open surgery, while simultaneously allowing the surgeons to work through the small ports of minimally invasive surgery.
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