Goldman Sachs Says the Crowd Is Wrong on This Beaten-Down Medical Robotics Giant

Intuitive Surgical (NASDAQ: ISRG) has faced challenges over the past 12 months, and its shares have declined by 26% during this period. However, some Wall Street analysts remain bullish on the stock, with several setting price targets that imply reasonable upside from current levels. Take David Roman, an analyst at Goldman Sachs (NYSE: GS). He recently maintained a "buy" rating on the stock, giving it a 12-month price target of $558. That's 47% above Intuitive Surgical's current stock price. Should investors take Roman's advice and rush to buy the company's shares?

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Focus on the long game

Intuitive Surgical's recent headwinds include lower-than-expected margins tied to the rollout of the da Vinci 5, the latest version of its famous robotic-assisted surgery (RAS) system, launched in 2024. The da Vinci 5 has experienced strong adoption, but it comes with lower margins than previous versions. The medical device specialist is also dealing with steep tariffs, leading to rising costs. It's not clear that the company can solve these issues within the next six to 12 months. However, there are still great reasons to be bullish on Intuitive Surgical's long-term outlook. Consider the company's da Vinci 5.

This newer product has several advantages over previous versions, including the Force Feedback Technology, which allows surgeons to feel the pressure and texture of tissue through the robotic controls, giving them a better sense of touch that could make delicate procedures safer, more precise, and easier to perform.

With improved features like these, the da Vinci 5 could help expand the company's market by attracting surgeons or hospitals that had been hesitant to use the da Vinci system and, potentially, earn indications that previous versions couldn't. The result could be a much larger installed base and stronger, higher-margin recurring revenue from the sale of instruments and accessories.

They can also help Intuitive Surgical keep competitors at bay, especially as the company faces increased competition from several healthcare giants launching their own robotic systems. In other words, the da Vinci 5's lower margins could be worth the trouble. True, Intuitive Surgical recently updated the da Vinci 5's Force Feedback tools to last 15 uses instead of six -- which could lead to lower recurring revenue as hospitals order these instruments less often.

That's another reason some investors ran for the hills. However, Intuitive Surgical has previously expanded the maximum use count for some of its instruments, with minimal impact on top-line growth. Finally, Intuitive Surgical still has a large addressable market in the RAS industry. The minimally invasive procedures they enable surgeons to perform offer significant advantages over open procedures. Yet the market is underpenetrated and could grow even further as the world's population ages.

Meanwhile, Intuitive Surgical benefits from a wide moat due to high switching costs. For all those reasons, the stock is worth seriously considering on the dip. Will it soar by 47% over the next 12 months? Probably not, given that it still faces near-term headwinds. But the company's long-term prospects are strong.

Prosper Junior Bakiny has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Goldman Sachs Group and Intuitive Surgical. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.