Analysts see bright future for Intuitive Surgical

William Blair & Co. analyst Ben Andrew initiated coverage of the Sunnyvale, Calif.-based company, which makes the daVinci system, with an "Outperform" rating.

He said the company is "just getting started," having already placed 867 da Vinci surgical systems just with mainly urologists and gynecologists.

"There are already signs of new use by hard-to-crack cardiovascular surgeons," he wrote in a note to clients. "In our view, system penetration is no more than 15 percent in the United States today."

Intuitive Surgical's 220-person sales force is easily capturing that wide-open market opportunity, as clinicians happy with their initial success with daVinci in hard-to-perform surgeries are open to using it for a broader list of procedures.

Andrew predicts the company will deliver 45 percent revenue growth this year to $872 million, 38 percent growth in 2009 and 30 percent over the next several years.

Lazard Capital Markets analyst Sean Lavin also backed his "Buy" rating and $420 price target on the stock Wednesday. As doctors increasingly shift to robotic surgery over the next few years, he sees an additional six to nine million potential procedures opening up for the daVinci system in the U.S. alone.

Lavin pointed out that at the ISMICS conference Wednesday, physicians will discuss robotic general surgery (daVinci) in detail "for what we believe is either the first time, or the most extensive dialogue at a large medical conference."

This could be favorable for the company's shares, he said, especially since the stock has fallen 10 percent since mid-May and is at a three-month low for no apparent reason. Shares dipped $2.23 to $268.03 in afternoon trading, on an overall down day for the markets.

Lanvin also said comments made Tuesday by medical device and software maker Varian Medical Systems that creditors are fighting with each other to loan money to hospital customers for technology investments means there is substantial financing out there to fund doctors' purchases of daVinci.