Intuitive Surgical Inc., NASDAQ: ISRG is in deep trouble this morning following a negative note from Deutsche Bank on the Sunnyvale-based biotechnology company.
Investment firm downgraded ISRG’s shares to “sell”, and reduced its target price to $440. This indicates a potential decline of over 15% from the current level.
Jim Cramer, the famous investor who appeared today on CNBC called Intuitive Surgery stock “one my favorite companies”.
Why does Jim Cramer like Intuitive Surgical?
Intuitive Surgical was given its first “sell” rating by Deutsche Bank on Monday. This is largely because the bank expects that the rising price of remanufactured instruments will be a significant headwind in years to come for their Da Vinci robot system.
Jim Cramer, however, took a positive view on ISRG’s shares in “Squawk On The Street”, as the Nasdaq listed firm continued to report solid quarters.
Intuitive Surgery stock, according to the ex-hedge fund manager, is still worth buying as it provides exposure to “a premier, rapidly growing company.”
Jim Cramer is still bullish about the biotech stocks, given its track record of success. He added that ISRG has been one of the most successful stock charts in the last 20 years.
ISRG could gain from the razor and blade model
Jim Cramer is a fan of Intuitive Surgery’s “razor and blade” business model, which means they sell surgical robots like a razor and make money by selling tools and accessories for every procedure.
He acknowledged that third parties trying to sell remanufactured products could harm ISRG’s profits, but he still sees it as an excellent business, which will continue to reward investors in the future.
The biotech company reported their financials in late April that easily exceeded Street expectations.
Intuitive Surgical’s shares are not attractive to income investors because they don’t pay a current dividend.
Intuitive Surgical is it worth the price?
Jim Cramer’s not the only analyst who is bullish about ISRG at its current level.
The bearish note from Deutsche Bank on Intuitive Surgery stock comes just days after Stephanie Link – the Chief Investment Strategist at Hightower – piled up the biotech company as a “secular growther in healthcare”… it is hard to find a secular grower in the healthcare industry.
Link called the biotech company attractive, citing its current price decline of more than 10 percent compared to its high for this year.
Intuitive Surgical anticipates that its gross margin will be capped this year at 66.5%, down from a tad more than 69% in the years 2024.
The impact of Trump’s tariffs is responsible for a large part of this expected decline.
The post Intuitive Surgical Stock – a ‘premier name with high growth’ despite a first sell rating could be updated as new information becomes available
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