What’s Next For ISRG Stock After An Upbeat Q4?

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ISRG: Intuitive Surgical logo
ISRG
Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) recently reported its Q4 results, with revenues and earnings exceeding the street estimates. The company reported revenue of $2.4 billion and adjusted earnings of $2.21 per share, compared to the consensus estimates of $2.2 billion and $1.79, respectively. The company’s upbeat performance was driven by strong global da Vinci procedure volume, which was up 18% y-o-y.

ISRG stock, with 73% returns since the beginning of 2024, has outperformed the S&P 500 index, up 28%. The company’s launch of its new robotic surgical platform – da Vinci 5 – has led to an increased optimism among investors. But, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfoliowhich has outperformed the S&P, and clocked >91% returns since inception.

Intuitive Surgical’s revenue of $2.4 billion in Q4 reflects a 25% y-o-y growth, driven by an 18% rise in worldwide da Vinci procedure volume. The company placed 493 da Vinci systems during the quarter, including 174 da Vinci 5 systems, that were launched in the U.S. last year. Intuitive Surgical’s total installed base increased 15% y-o-y to 9,902 systems in Q4. The company’s operating margin expanded around 210 bps to 30.4% in Q4. Higher revenues and margin expansion resulted in a 20% jump in the bottom-line to $2.21, versus $1.84 in the prior-year quarter.

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Looking forward, Intuitive Surgical expects its 2025 global da Vinci procedure volume to grow between 13% and 16%. However, it expects its gross margin to contract by around 150 bps and operating expenses to increase in 2025. Considering these factors, ISRG will likely see a decline in earnings this year.

What does this mean for ISRG stock?

Although ISRG posted an upbeat Q4, its stock declined 4% on Friday, January 24, 2025, amid the bleak outlook of an expected decline in earnings. Even if we look at a slightly longer period, the increase in ISRG stock over the last four-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 32% in 2021, -26% in 2022, 27% in 2023, and 55% in 2024.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could ISRG face a similar situation as it did in 2022 and underperform the S&P over the next 12 months — or will it see a strong jump? While we will soon update our model for ISRG to reflect the latest results, we think ISRG stock is fully valued now. At its current levels of $584, ISRG stock is trading at 25x trailing revenues, versus the stock’s average P/S ratio of 20x over the last five years. Now, a slight rise in valuation multiple seems justified, given the strong growth in procedure volume as well as the company’s sales. In fact, our analysis – ISRG Stock To $5000? — presents a bullish outlook for Intuitive Surgical, projecting substantial growth in its share of overall surgical procedures.

While ISRG stock appears fully priced, it is helpful to see how Intuitive Surgical’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Jan 2025
MTD [1]
Since start
of 2024 [1]
2017-25
Total [2]
 ISRG Return 12% 73% 729%
 S&P 500 Return 4% 28% 173%
 Trefis Reinforced Value Portfolio 8% 25% 812%

[1] Returns as of 1/27/2025
[2] Cumulative total returns since the end of 2016

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