Intuitive surgical - Strong business but a 50% decline in price. Is it worth a buy?

Stock pick saturday #6 - Intuitive surgical

Each week on saturday I dive deeper in one company. Today episode 6 about Intuitive Surgical. You can read one of my recent episodes about Netflix here:

Stock pick saturday #4 - Netflix

🏢 What is Intuitive surgical?

Intuitive surgical designs, build and sells robotic surgical systems. The goal for Intuitive is to benefit care systems worldwide by their robotic assistents and systems.

The da vinci 5 is one of the key concepts of the Intuitive business models.

The da vinci 5 is a an advanced, multiport robotic-assisted surgical system. This systems had more than 150 innovations compared to previous sytems, which will lead to reduced procedure times, which eventually will lead to more operational efficiency within the surgery process for the clients.

Imagine this. Intuitive installed 468 systems in Q2 2026 alone. If they keep growing they will install more than 2000 systems each year for the coming years.

Each system will earn them around $2 million dollar for the purchase. After this one-off, they will earn for the different instruments, maintenance and service contracts. This gives Intuitive recurring revenues year after year.

In the image below, the revenue trend for Intuitive is shown.

84% of the revenue is recurring revenue and it is also growing year after year, which makes the business more predictable and healthy.

🌍 The Macro Context

Ageging demographics gives a tailwind

In the first place the ageing demographics gives Intuive a great structural tailwind.

Both Europa and the US are ageing in a rapid pace. Logically, elder people needs more surgery’s. Therefore Intuive is not cyclial or dependent of the economic situation.

This trend just keeps growing.

AI is an accelerator for Intuive

The da Vinci model is one of the key strengths for Intuive.

AI will accelerate this strength, because AI makes da Vinci more precise. More precision attracts more hospitals. And more hospitals mean more stable and recurring revenues for Intuitive. The macro trend of AI adoption is directly strengthening Intuitive’s position in the healthcare market.

Fast growing market

The surgical robots market is expected to grow to more than 17 billion in 2034.

That means nearly a triple of the current market.

With Intuitive as one of the leaders in this market, with approximately 60% of market share, this means opportunity to grow in a fast growing market.

📊 The Fundamentals

If hospitals choose for Intuitive, they will not easily replace it

If an hospital have the da Vinci systems operating, the chance that they will change it, is very low. Moving to a competitior means, new procedures, new trainings for the employees, new workflows and increasing risks of mistakes when they have to change their workflows.

If the hosptials chose for the da Vinci systems, also the supply chains and contracts around the systems are replaced, so switching is not easy and will be expensive.

Fast growing market

In the image above you see how fast the surgical robot market is growing. With more than 1500 da Vinci systems currently working at the moment, Intuitive have build a big market share. AI will accelerate the move to systems like the da Vinci 5. It will give more data, better models and better products for the clients. Intuitive have a strong position in this field.

💪 The Strengths

1. Recurring revenue stream

If we dive into the revenue of Intuitive, we 85% of the revenue is recurring, what means that the future cash flow can easily be calculated and that gives a stable fundament.

2. Beating estimates five quarters in a row

Intuitive reported beats of estimates five quarters in a row. They reported $2,80 EPS for Q2 compared to $2,50 estimates. That is a strong 12% beat.

3. The moat is getting stronger

With a lot of da Vinci systems installed already and the current market share above 60%, Intuitive has a strong position. But within the strong growing market and the AI implementations, Intuitive will further strength this position. Other companies have to pick up to compete with the da Vinci 5 system, which is very difficult in the beginning.

⚠️ The Weaknesses

1. High valuation

   The current P/E ratio for Intuitive is around 40, after a big drop in price. A fair price to pay is important when you consider to buy a company. Currently you pay a significant premium for the great fundamentals of Intuitive.

   The historical P/E for Intuitive over the years was quite high compared to competitors in the healthcare sector.

2. Tarrifs are a threat we can’t ignore

   During last years Trump set different tarrifs for different countries and sectors. For a hardware company with global supply chains, this is a factor you cannot ignore.

3. Ozempic is eating into demand

   The rise of the GLP-drugs Ozempic and Wegovy has reduced the expected demand for surgery, which was one of da Vinci’s largest procedure categories. This could be a structural headwind to consider.

   In the following part I describe an extensive valuation in my personal built scorecard. I screen on different metrics to define if I think the company is worth to look at and eventually buy.

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