Intuitive Surgical Stock Has Been Plummeting. Is It Time to Buy?

Core Viewpoint - Intuitive Surgical's stock has declined approximately 20% over the past three months, primarily due to management's comments regarding tariff and international market pressures, despite the underlying strength of the core business [1][2][4]. Company Performance - In Q2, Intuitive Surgical reported a revenue increase of 21% to $2.44 billion, with worldwide da Vinci procedures rising about 17% [9]. - The company placed 395 da Vinci surgical systems during the quarter, contributing to an installed base of 10,488 units [9]. - Non-GAAP earnings per share (EPS) increased to $2.19 from $1.78 a year ago, indicating strong financial performance [9]. Management Insights - Management highlighted that demand in Japan was previously boosted by COVID-related funds, and several international markets are now facing budget constraints [4]. - Pricing pressure in China and rising domestic competition were also noted as potential challenges that could affect demand and system orders [4]. - To address tighter budgets, the company plans to increase reliance on leasing in international markets, where leasing currently accounts for only 30% to 40% of placements [5]. Market Conditions - Tariffs have been identified as a concern, with management estimating a gross-margin headwind of approximately 1 percentage point from tariffs in 2025, with potential for a higher impact next year [6][7]. - Despite the recent stock pullback, the company is viewed as having a resilient growth trajectory, supported by procedure growth and an expanding installed base [8][11]. Investment Considerations - The valuation of Intuitive Surgical remains premium, trading near 50 times an annualized run-rate of Q2 non-GAAP EPS, which is considered reasonable for a market leader with strong growth [12]. - The investment case is supported by procedure growth, an expanding installed base, and the rollout of higher-value platforms, which are critical for sustaining growth [11]. - Management's conservative approach and consistent risk highlighting have built credibility, suggesting that current market conditions may present a buying opportunity for long-term investors [13].