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Intuitive Surgical (ISRG) Remains Under Short Seller Attack, But a Product Refresh Could Provide Upside

January 17, 2013 12:55 PM EST Send to a Friend
Get Alerts ISRG Hot Sheet
Price: $411.99 -0.76%

Rating Summary:
    18 Buy, 6 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 9 | New: 22
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Intuitive Surgical (NASDAQ: ISRG) saw a wild ride mid-day after short selling website Citron Research issued Part 2 of its in-depth negative research on the firm.

After falling to $485.80 mid-day, shares reversed and are now higher by $14.24 (2.86%) to $512.74.

Contributing to the move higher could be comments made in a Goldman Sachs research note overnight.

While highlighting their recent hospital survey which showed da Vinci robots are not a top priority with hospitals, Goldman also said a not yet announced next-generation product could be a source of upside.

"While not yet announced, a new system iteration (the most recent was da Vinci Si in 2009) as well as uptake of expanded device add-ons (i.e. EndoWrist vessel sealer, stapler system, dual consoles) could be a driver of new growth."

Goldman also commented on the legal liability that ISRG may face regarding malpractice suits - a key argument of Citron Research. They are not at all worried.

"We see ISRG's relative safety profile as an attractive alternative when compared to other surgical options. Additionally the company's strong cash and investment holdings ($3.3 billion as of 3Q12) and significant free cash flow generation (we estimate $800+ million for 2013E) should be more than sufficient to settle any legal proceedings with plenty of room to spare."

Goldman maintained a Neutral rating on ISRG but raised their price target from $561 to $587 as they roll forward valuation framework to YE2013 and have increased outer-year revenue forecasts.

Citron, for its part, sees the stock headed down to $300 over the next 12-months, citing outrageous marketing claims, a fierce legal challenge, and the end of the medical arms race due to Obamacare. Citron's report in full can be found here.

Intuitive Surgical is scheduled to report Fourth Quarter 2012 results Tuesday, January 22nd, after the market close.

For an analyst ratings summary and ratings history on Intuitive Surgical click here. For more ratings news on Intuitive Surgical click here.

Shares of Intuitive Surgical closed at $498.50 yesterday.




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Goldman Sachs, Citron Research

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