Morgan Stanley Sees Potential Growth in These 2 Surgical Robotic Stocks

Morgan Stanley analyst Andrew Ranieri has identified two surgical robotic stocks with significant growth potential: Intuitive Surgical (ISRG) and PROCEPT BioRobotics (PRCT). Both companies have demonstrated strong performance this year, with ISRG up nearly 60% and PRCT up almost 100%. Ranieri believes that the da Vinci 5 system from Intuitive Surgical and the Aquablation therapy from PROCEPT BioRobotics have the potential to drive further growth in these companies.



Intuitive Surgical (ISRG)

Intuitive Surgical's da Vinci Surgical System has been a market leader in robotic surgery for years, and the company continues to innovate with the da Vinci 5 system. The da Vinci 5 offers improved precision, accuracy, and ergonomics, which can help surgeons perform complex procedures with greater ease and better patient outcomes. In the recent quarter, Intuitive Surgical reported a 15% year-over-year increase in its installed base and an 18% year-over-year growth in the number of da Vinci procedures performed worldwide.

Ranieri expects strong placements of the da Vinci 5 system to drive upside to Street installed base expectations. He also believes that the system's advanced capabilities could open up new surgical areas, such as glioblastoma resection, hybrid cardiac revascularization, and nipple-sparing mastectomy. These new areas could generate additional revenue for Intuitive Surgical and contribute to the company's growth.



Intuitive Surgical's stock has outperformed the broader market this year, and shares are up close to 60%. The company's strong performance is supported by its expansion and the growing demand for robotic surgical systems. In the recent quarter, Intuitive Surgical placed 379 new da Vinci surgical systems into operation and grew its installed base to 9,539 systems, representing a 15% year-over-year increase.

Ranieri has put an Overweight (Buy) rating on ISRG, with a price target of $650, indicating a one-year upside of 21%. The consensus among analysts is also bullish, with 16 Buys to 4 Holds, resulting in a Strong Buy consensus rating. The 12-month average target price of $567.65 implies an upside potential of 5.4% in the next 12 months.

PROCEPT BioRobotics (PRCT)

PROCEPT BioRobotics is focused on bringing the advantages of robotic surgery to men's health, specifically addressing urological conditions. The company's Aquablation therapy is the only image-guided, robotic-assisted, heat-free waterjet on the market for the treatment of benign prostatic hyperplasia (BPH). The next generation of PROCEPT's product line, the HYDROS robotic system, brings an AI platform to the Aquablation therapy, improving image recognition and better identifying potential issues during ultrasound imaging.

PROCEPT's shares have received a nice boost in late October when the company released its 3Q24 results. Those results showed $58.37 million in quarterly revenue, up 66% year-over-year and beating the estimates by $5.18 million. The company's earnings came to a net loss, but the 40-cent EPS loss was 9 cents per share better than had been anticipated and was an improvement from the 51-cent loss reported in the prior-year quarter.

Morgan Stanley analyst Patrick Wood sees a lot of potential in PROCEPT's products and believes that the stock today is pricing in maybe a 30% terminal share of BPH procedures and 35% terminal EBITDA margin, which seems potentially conservative. He expects the economics for aquablation to work at a facility level, and the ability to use it across a range of prostate sizes could easily see it ending up at c. 50% or more penetration of interventional BPH procedures.

Wood has put an Overweight (Buy) rating on PRCT, complementing that with a $105 price target that suggests a 26% upside on the one-year horizon. The consensus among analysts is also bullish, with 7 Buys and 2 Holds, resulting in a Strong Buy consensus rating. The average price target of $99.63 implies a gain of 19% in the next 12 months.

To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

2 No-Brainer Healthcare Stocks to Buy With $1,000 Right Now
A few different elements can make a stock a no-brainer buy. The company could be the leader in its market, or well diversified across various markets. In any case, it should have a solid track record of earnings growth and promising long-term prospects. It should be the sort of company that you can add to your portfolio, then sit back and relax -- because you're confident that this player will excel over time.

It's the kind of stock you'll want to buy now and hold on to for the long haul, and by this, I mean the next five to 10 years. This gives the company the time to grow earnings, and this ideally will translate into gains in the stock price. As a long-term investor, you could benefit not just over one year, but potentially over most of your time owning the stock.

If you have $1,000 to invest right now -- or even less -- here are two no-brainer healthcare players that make a great addition to any portfolio.

1. Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) is the global leader in robotic surgery. With a compound annual growth rate of about 15%, this market is expected to reach more than $25 billion by 2030, according to Meticulous Research. Intuitive's flagship product is the da Vinci, a system used in a wide variety of surgeries, from cardiac, gynecology, and urology to general surgery such as hernia procedures.

Intuitive suffered early in the pandemic as hospitals worldwide postponed surgeries, but in more recent times, procedure volume has been going strong. In the recent quarter, da Vinci procedures increased 18% year over year, and revenue climbed 17% to more than $2 billion. Importantly, Intuitive grew its installed base by 15% to more than 9,500 systems as of the end of September.

I like Intuitive's strong moat, or competitive advantage, which has two parts. First, surgeons train on the da Vinci and are used to the platform, so it's unlikely they'll want to switch to a rival. Second, after spending more than $1 million on a robot, hospitals will probably continue using the platform, aiming to amortize the investment over a period of years.

I also like the idea that Intuitive makes most of its revenue not from selling the actual robots, but from selling instruments and accessories required for the procedures. This is positive because it offers the company a form of recurrent revenue, so revenue from the da Vinci doesn't end with the purchase or leasing of the actual platform.

Intuitive may look expensive, trading at more than 75x forward earnings estimates, but it's worth the price considering its leadership, moat, and guarantee of recurrent revenue.

2. Abbott Laboratories

Abbott Laboratories (NYSE: ABT) is a well-diversified healthcare company, with four distinct units: Medical devices, diagnostics, nutrition, and established pharmaceuticals. This is great because it means if one of these businesses faces tough times, another could compensate and maintain overall growth.

This is actually happening right now. With coronavirus testing on the decline, the diagnostics business has seen revenue fall. But in the recent quarter, the medical devices unit delivered double-digit revenue growth, helping Abbott to report a 5% increase in revenue to $10.6 billion. Over time, Abbott has delivered gains in revenue and profit.

Abbott sells market-leading products across its businesses, from the Ensure brand in its nutrition business to the FreeStyle Libre continuous glucose monitoring system in its medical devices unit. In fact, Abbott's sales of glucose monitoring systems generated more than $1.6 billion in the recent quarter for a year-over-year increase of about 20%.

The company also has a full pipeline of innovations to keep the growth going. It most recently launched Lingo, a continuous glucose monitoring platform for wellness purposes. Without a prescription, you can gain access to this system to monitor your metabolic health.

Abbott shares trade for about 23x forward earnings estimates. That's a very reasonable price to pay for a company that has a strong track record of growth, market-leading products, and solid long-term prospects.

Should you invest $1,000 in Intuitive Surgical right now?

Before you buy stock in Intuitive Surgical, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intuitive Surgical wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2