Up About 62% in a Year, Can Intuitive Surgical Stock Keep Soaring?

Shares of robotic surgery pioneer Intuitive Surgical (NASDAQ: ISRG) have been soaring lately. A preliminary look at sales results from the fourth quarter of 2024 suggests its business is on the right track.

Intuitive Surgical's recent performance and forward outlook are outstanding, and investors have noticed. Shares of the well-established medical technology business rose 62% during the 12-month period that ended Jan. 22, 2025.

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Is it still a good time to buy Intuitive Surgical, or has it risen too far already? Below, I'll look at some of the reasons the stock has been soaring to see if it's not too late to buy some shares.

Why Intuitive Surgical stock has been soaring

On Jan. 15, Intuitive Surgical announced preliminary results from the fourth quarter of 2024. Its da Vinci surgical robot system represents a big investment for hospitals, but it's one they're willing to make. Hospitals worldwide placed 493 da Vinci surgical systems in the third quarter, 174 of which were new da Vinci 5 systems.

The new da Vinci 5 system costs between $2 million and $2.5 million. This is significantly more than previous iterations but isn't preventing hospitals from buying or leasing the new systems.

Intuitive Surgical's latest surgical system could have an important advantage over the competition. Unlike Stryker's endoscopic tower equipment, da Vinci 5 integrates visualization and other features into a single tower.

Intuitive Surgical isn't just placing lots of next-generation surgical systems, it's selling heaps of instruments that must be replaced following each procedure. Fourth-quarter instrument and accessory sales bounced 23% higher year over year to $1.4 billion, or 58.5% of total revenue.

Another great year ahead?

In addition to reporting unaudited preliminary results from the fourth quarter of 2024, Intuitive Surgical issued guidance for 2025. The company reported an 18% rise in da Vinci procedure volume in 2024 that could subside slightly this year. Management expects procedure volume to rise by 13% to 16% in 2025.

As the only company selling the instruments and accessories hospitals need to use their da Vinci 5 robots, Intuitive Surgical has a lot of pricing power. Sales of instruments and accessories sales tend to outpace procedure volume by a few percentage points. In other words, the company's largest revenue stream will likely rise by more than 13% in 2025.

In addition to an integrated tower, the new da Vinci 5 system includes a force feedback feature that allows surgeons to sense the push and pull forces exerted on tissues with their fingers instead of relying on visual clues.

A premium valuation

Medical-technology giant Johnson & Johnson (NYSE: JNJ) is developing a new robotic surgical system, but it's a long way behind the market leader. J&J began enrolling patients in a clinical trial with its Ottava robotic surgical system last November.

With da Vinci 5 cementing Intuitive Surgical's lead position in the robot-assisted surgery market, the company's shares are trading at a premium valuation. Investors have been paying a sky-high 77 times forward-looking earnings expectations for the stock.

Intuitive Surgical has been trading at a nosebleed-inducing valuation because investors are assuming it can retain its lead after J&J launches its next-generation system. It's a sound thesis because buying a new robot-assisted surgery system, plus training staff to use it, are big expenses most hospitals would like to avoid.

While there are good reasons to assume Intuitive Surgical has many years of growth ahead, individual investors should realize the risks involved with buying a stock at such a high valuation. If management issues forward-looking guidance below Wall Street's high expectations at any time over the next several years, the stock's high valuation could come crashing down. It's probably best to watch this stock from a safe distance for now.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.