Analysts Say Intuitive Surgical Inc (NASDAQ:ISRG) is the ‘Best of Breed’ Stock for Q3

Attiya Zainib

27 June 2024 at 9:15 am·4-min read

We recently published a list of the 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America. Since Intuitive Surgical Inc (NASDAQ:ISRG) ranks 3rd on the list, it deserves a deeper look.

Analysts at BofA Securities recently published a list of “best of breed” stocks for the third quarter of 2024, which they believe are the top choices for investors on the back of their high quality, liquidity, earnings growth and margin upside when compared with peers. BofA’s “best of breed” basket of stocks has reportedly outperformed the MSCI All Country World Index (NASDAQ:ACWI) by 584 basis points, and returned a whopping 470% since its inception in April 2010.

Bank of America analyst Michael Hartnett thinks these best of breed companies have strong balance sheets, cash flow and high EPS growth as well as competent management. Hartnett believes these companies generate the “best relative returns” in the long term and can protect investors against short-term volatility.

For this article we scanned BofA’s best of breed basket of stocks and picked 10 companies with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

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Intuitive Surgical Inc (NASDAQ:ISRG)

Number of Hedge Fund Investors: 79

While Intuitive Surgical Inc (NASDAQ:ISRG) valuation has concerned many, Bank of America called the robotic surgery-focused company a best of breed stock for the third quarter in a latest report. Intuitive Surgical Inc (NASDAQ:ISRG) bulls believe the stock is poised for long-term growth as robots will play a key role in surgeries and the broader healthcare industry in the coming years. During the first quarter, Intuitive Surgical Inc (NASDAQ:ISRG) procedure volume, which shows the number of surgical procedures carried out by Intuitive Surgical Inc (NASDAQ:ISRG) robots, jumped 16% year over year, coming in at the higher end of its estimates. Revenue in the quarter jumped about 12% to $1.89 billion, beating expectations by $20 million. Intuitive’s efforts to come out of the COVID-induced slowdown are working. Its revenue has grown at a 17.8% CAGR after the pandemic, compared with the pre-pandemic revenue CAGR of 18.3%.

There are about 8,600 da Vinci systems (Intuitive Surgical robot) installed at healthcare facilities across the globe. Some estimates suggest the robotic surgery market is expected to grow at a CAGR of 11% through fiscal 2026. With a close to 70% market share, Intuitive Surgical is positioned well to benefit from this organic growth. Wall Street expects Intuitive Surgical Inc (NASDAQ:ISRG) earnings to grow 17% next year and at 12.6% over the following five years on a per-annum basis.

Baron Health Care Fund stated the following regarding Intuitive Surgical, Inc. (NASDAQ:ISRG) in its first quarter 2024 investor letter:

“Intuitive Surgical, Inc. (NASDAQ:ISRG) sells the da Vinci surgical robotic system for minimally invasive surgical procedures. The stock rose after the company announced the planned launch of the da Vinci 5, its next-generation, multiport robotic system. The new system has 10,000 times the computing power of its predecessor and features over 150 design upgrades such as force feedback, improved visualization, and productivity enhancements. Intuitive plans to launch the device at a small number of customers in the U.S. before releasing it more broadly. We think the da Vinci 5 will enable Intuitive to continue to generate strong revenue and earnings growth and maintain its competitive edge.”

Overall, Intuitive Surgical Inc (NASDAQ:ISRG) ranks 3rd on Insider Monkey’s list titled 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America. While we acknowledge the potential of Intuitive Surgical Inc (NASDAQ:ISRG), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Intuitive Surgical Inc (NASDAQ:ISRG) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Disclosure: None. This article is originally published at Insider Monkey.

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Analysts Say Intuitive Surgical Inc (NASDAQ:ISRG) is the ‘Best of Breed’ Stock for Q3

Intuitive Surgical Inc (NASDAQ:ISRG)

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