Is Intuitive Surgical a Buy After Volatile Reaction to Earnings?

Core Viewpoint - Intuitive Surgical reported strong quarterly earnings with a double beat on both revenue and earnings per share, but mixed guidance due to tariff uncertainties affecting future growth prospects [3][4][5]. Financial Performance - The company achieved earnings per share (EPS) of $1.81, exceeding estimates by$ 0.10 and reflecting a 20% year-over-year increase [3]. - Revenue for the quarter was $2.25 billion, surpassing estimates by 3.27% and showing a 19% year-over-year growth [3]. Guidance and Growth Expectations - Intuitive Surgical anticipates a procedure volume growth of 15% to 17%, an increase from the previous guidance of 13% to 16% [4]. - Despite the positive growth outlook, the company faces challenges from tariffs, which could offset this growth [5]. Tariff Impact - The company manufactures 98% of its Da Vinci systems in the U.S., but 70% of endoscopes and 80% of instruments and accessories are sourced from Europe and Mexico, respectively [6]. - Intuitive Surgical expects a non-GAAP gross margin of 65% to 66.5%, a decline of about 5% year-over-year, factoring in an estimated revenue impact of 1.7% due to tariffs [7]. Stock Performance and Analyst Ratings - The current stock price is$ 508.13, with a 12-month price target of $598.95, indicating a potential upside of 17.87% [8]. - The stock is trading at a forward P/E ratio of 75.8, which is considered expensive compared to the broader market but aligns with its five-year average [8]. - Analysts suggest a cautious approach, recommending waiting for the stock to break above the 50-day simple moving average before taking a long position [10]. Tariff Outlook - The company faces potential tariffs of 125% and 145% for imports and exports to China, 10% for European components, and 25% for certain products from Mexico [12].