Intuitive Surgical: Operating Well Even During Challenging Times

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I reviewed Intuitive Surgical (ISRG), one of my favorite companies, in early March, suggesting that it could move from the $90 price at the time to $125 by year-end. Well, with a lot of help from the market and what I believe was stellar execution in a very tough environment during Q1, the stock closed at $130 on Friday. As I incorporate the new information into my view regarding the current valuation, I find the stock probably stretched near-term but capable of rising as the year progresses if they are able to exceed current expectations or if the market continues to be more forward-looking than it has been up until recently.

Having followed the company for almost 5 years now, I have to say that Thursday was one of the strangest days ever. First, the company accidentally filed its 8-K early, and the stock plunged initially on what was clearly a headline miss. It traded as low as 106 in the pre-market. As it became clear that there was a special situation impacting reported numbers, the stock rallied sharply and then traded above 130 (still in pre-market!). During the day, it traded between 113 and 127, closing almost unchanged at 118. During the call, as the company announced it was “suspending” certain key elements of its full-year guidance, the stock plunged below 105 briefly before ending the after-hours session near 110. The range on Friday was 114-132, closing at 130 and leaving the stock now up year-to-date. Wow!

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