Stock market today: S&P 500 drops for fifth day as focus shifts to Powell’s speech
Monday, Truist Securities adjusted the price target for Intuitive Surgical (NASDAQ:ISRG) shares, bringing it down to $605 from the previous $666, while still maintaining a Buy rating on the stock. The new price target is based on a projected 64 times price-to-earnings (P/E) ratio on the adjusted 2026 earnings per share (EPS), which reflects approximately a threefold relative P/E premium compared to the S&P 500.
The decision to lower the price target comes as a result of a contraction in the S&P multiple since the last valuation update. Intuitive Surgical’s stock has experienced a sell-off along with other growth stocks over the past few weeks, attributed to several factors. These include its correlation with the NASDAQ, which has seen an 11% decline since February 20, a broader market rotation out of growth stocks, and a sudden early-March hedge fund de-grossing event, in which Intuitive Surgical was particularly affected due to its status as a ’crowded MedTech long’.
Despite the recent market challenges, Truist Securities believes that Intuitive Surgical warrants a premium valuation. The firm cites the company’s sustained, elevated procedure growth and the introduction of a new product cycle as drivers for potential revenue and EPS growth acceleration. InvestingPro data supports this view, showing robust revenue growth of 17.2% in the last twelve months and an expected 15% growth for FY2025. Get access to 12+ additional ProTips and comprehensive valuation metrics with an InvestingPro subscription.
During the last significant market downturn from June to October 2022, Intuitive Surgical’s relative P/E premium fell to approximately 2.3 to 2.4 times that of the market. While higher interest rates were a factor during that period, making direct comparisons less ideal, applying a similar 2.3 times premium to the current 21 times S&P next twelve months (NTM) P/E would imply a 50 times P/E for Intuitive Surgical, or roughly $475 per share based on 2026 estimated EPS. This price is not significantly different from the stock’s closing price on March 14, which was approximately $484 per share, suggesting that macroeconomic concerns specific to the company may already be largely factored into its stock price.
In other recent news, Intuitive Surgical reported a strong finish to the fourth quarter of 2024, surpassing expectations with a 10% and 24% beat on revenue and earnings per share, respectively. Piper Sandler responded by raising its price target for the company to $670, maintaining an Overweight rating, while RBC Capital Markets reaffirmed an Outperform rating with a $641 target. Bernstein analysts also maintained an Outperform rating, setting a $700 price target, citing a 38% year-over-year increase in earnings per share to $2.21. Meanwhile, Truist Securities increased its price target to $666, holding a Buy rating, despite noting some headwinds like a decline in gross margins and currency exchange impacts.
Intuitive Surgical’s procedure volume grew by 18% year-over-year in the fourth quarter, and the company projects a 13-16% increase for 2025. The launch of the da Vinci (EPA:SGEF) 5 (dV5) system is anticipated to be a significant driver for future growth. Oppenheimer maintained a Perform rating, noting concerns about market saturation and the valuation of the dV5 system. Despite these concerns, the company secured a €290 million distribution agreement for expansion in Europe and received new approvals for thoracic and colorectal indications.
The company’s gross margin stood at 69.5% in the last quarter, with an operating margin of 38.4%, contributing to its robust financial performance. Analysts from firms like Piper Sandler and Truist see potential for continued growth, with projections of revenue growth and earnings per share increases in the coming years. The anticipated full launch of the dV5 system mid-year is expected to be a pivotal development for Intuitive Surgical’s market strategy.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.