Intuitive Surgical definitively slammed investors' hope for a new robotic surgery system this year, and ISRG stock crumbled Wednesday.
The news came alongside lower-than-expected profit for the fourth quarter, though sales and procedure growth were in line with the company's pre-announcement. Recent investor debate focused on the potential for a next-generation robotic surgery system, adding onto its most notable offering called da Vinci.
"Intuitive Surgical shut this down in clear terms noting that it was not launching a new multi-port system in fiscal year 2023," Evercore ISI analyst Vijay Kumar said in a note to clients. "Management pointed to current regulatory environment that requires substantial clinical evidence for core technology changes as the reason."
On today's stock market, ISRG stock lost 5.5%, closing at 243.80.
ISRG Stock: The Biggest Downside
Mizuho Securities analyst Anthony Petrone called the news that Intuitive Surgical has pushed out its next-generation system the "biggest downside surprise" out of the earnings conference call.
"For context. the consensus view was coalescing around a potential U.S. unveiling at the upcoming annual SAGES conference later this year," he said in a note. "Feedback on the triggers behind the pushed timeline were supply chain setbacks and heightened regulatory hurdles that may require at least some level of prospective human clinical data for clearance."
Petrone kept his neutral rating and 240 price target on ISRG stock.
The company didn't offer a new timeline on when it might seek U.S. clearance for a new system. A new system could add $4 billion to Intuitive Surgical's coffers as hospitals look to replace their outdated models, he said.
With this catalyst out, Evercore's Kumar said investors might start to value ISRG stock differently. He cut his price target to 215 from 250, and kept his in-line rating.
Covid Disruptions Continue
During the December quarter, Intuitive Surgical earned $1.23 per share, down about 5%. That lagged analysts' projections by two pennies, according to FactSet. Sales were in line with the company's pre-announcement for $1.66 billion, though a hair below Wall Street's call for $1.67 billion. Revenue rose 7%.
The company noted it's still experiencing disruptions due to the Covid pandemic. Overall, the number of procedures performed using Intuitive Surgical's most famous system, da Vinci, rose 18%. On an annual compounded basis, procedures grew 14% from the fourth quarter of 2019 to the same period last year.
Procedure growth is an important metric, informing the strength of sales of one-time instruments and accessories. During the fourth quarter, sales of those items advanced 12% to $941 million. Intuitive Surgical noted Covid resurged in China during the fourth quarter.
Overall, Intuitive Surgical placed 369 new da Vinci systems in hospitals during the fourth quarter. But bearishly for ISRG stock, that was down 4% year over year.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
