Izzy Englander and Cathie Wood Agree: This Growth Stock Is a Buy

Looking to famous investors for potential stock advice isn't a bad idea. And it's even better when multiple prominent people on Wall Street are bullish on a stock.

That's what we seem to have with Intuitive Surgical (NASDAQ: ISRG), a medical device specialist. At least two notable names on The Street are on this train. One of them is Cathie Wood, the famous CEO of Ark Invest. The investment firm owns shares of Intuitive Surgical, as does Millenium Management, a hedge fund founded and led by billionaire Israel "Izzy" Englander.

Should the average investor follow these two leading voices and purchase shares of Intuitive Surgical?

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Intuitive Surgical is facing headwinds

Intuitive Surgical develops robotic-assisted surgery (RAS) devices, the most famous of which is the da Vinci system. Though the company has been a pioneer in this field, the market is now quickly changing. After two decades of little competition, the da Vinci system is set to face off against Medtronic's Hugo system in urologic procedures.

Medtronic is still awaiting U.S. clearance for its device, but given Hugo's strong clinical trial performance, it will likely get the nod. What's more, Medtronic will seek label expansions across other indications where the da Vinci system is approved. Further, Johnson & Johnson could also launch its own competitor, the Ottava system, within a few years. This competitive pressure could weigh on Intuitive Surgical's business.

Then, there is the threat of tariffs. Intuitive Surgical does significant manufacturing outside the U.S. Tariffs have already impacted its financial results, and the impact could worsen over time unless the company finds a solution. This could cut into its operating margins and earnings.

On top of all that, Intuitive Surgical's shares don't look cheap, trading at 48 times forward earnings. That is well above the healthcare sector's average of 17.4. So, there seem to be plenty of reasons to avoid the stock right now. In fact, Intuitive Surgical has underperformed the market this year.

Why Intuitive Surgical is a buy regardless

At first glance, Intuitive Surgical appears to be a business that relies on selling its da Vinci system. That's only part of the story, though. Distributing more of its RAS devices allows it to build a solid installed base. The company then generates revenue from the instruments and accessories it sells for procedures. Here is why this matters.

First, instruments and accessories have a much shorter lifespan than RAS systems. They need to be replaced after a certain number of procedures. This means that Intuitive Surgical's installed base generates significant recurring revenue from instrument sales.

Second, these likely carry higher margins than selling actual da Vinci systems. So, as the company's installed base grows and instruments and accessories capture an even higher percentage of total revenue, the company's margins should expand, all else being equal.

Third, Intuitive Surgical is looking at significant long-term tailwinds that should help boost revenue from this segment, notably the world's aging population, which will drive increased demand for the range of surgeries it offers. And in that department, there is ample whitespace. As Medtronic estimated a couple of years ago, less than 5% of eligible procedures were performed robotically at the time. That number probably has not changed significantly since.

Meanwhile, robotic-assisted minimally invasive surgeries offer significant advantages over open surgeries, as they require less skin incision, leading to less bleeding, less scarring, and faster recovery times. That's an important reason why, even as competition intensifies, Intuitive Surgical can continue generating excellent revenue and earnings.

But what about the threat of tariffs? Various corporations are exploring ways to mitigate that risk, with some success. Some have negotiated with the administration to get exemptions from tariffs, others have raised prices, others have moved their manufacturing footprints around, and so forth. Intuitive Surgical could do all three.

Lastly, regarding valuation, Intuitive Surgical has historically traded at high multiples. The company typically reports stronger revenue growth than its medical device peers, is consistently profitable, is a leader in an industry with a vast growth runway, and benefits from multiple moats, including high switching costs.

Intuitive Surgical is worth the premium, and for those willing to hold on to its shares for a decade or more, valuation will hardly matter then. That's why investors should take a page out of Izzy Englander's and Cathie Wood's book and purchase this company's shares.

Prosper Junior Bakiny has positions in Intuitive Surgical and Johnson & Johnson. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.