Intuitive Surgical's Huge Revenue Drop

Intuitive Surgical surprised analysts with revenue that was way down year over year. Is this a company in trouble?

Erin Kennedy
Erin Kennedy and Sara Hov
Apr 10, 2014 at 12:35PM
Health Care

Shares of Intuitive Surgical (NASDAQ:ISRG) dropped 7% yesterday after the company pre-announced earnings. Revenue was down 24% year over year, which was well beyond analysts' consensus estimate. However, in today's Stock of the Day, Motley Fool analyst Sara Hov says she doesn't see the news as all bad.

Part of that precipitous drop was $26 million in deferred revenue, which inflated the bad news a bit. The good news for the company, however, is that the FDA just approved its newest surgical robot system last week, the da Vinci Xi, which is a considerable upgrade both in terms of usability and capability from its previous model. Investors are hopeful that the new system can help the company expand into more complicated surgeries and wider use of its surgical robots.

Sara sees that part of the thesis as key in deciding whether this stock is a buy today. If the new system succeeds in gaining the company wider adoption of its systems, then yesterday's pullback could represent a good buying opportunity for Intuitive Surgical investors.