Buying Intuitive Surgical After Rally Leaves Room to Grow
Intuitive Surgical combines a dominant market position with an increasingly bullish chart.
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Do one thing, and do it well.
In July of 1995, the Amazon.com website went live. The website had one function, to sell books.
Amazon (AMZN) founder Jeff Bezos knew that, as an online retailer, he could offer a wider selection of books than any physical store. Today, Amazon is the world’s largest online retailer.Â
In 1998, Google (GOOGL) was incorporated. The website had one function, as a search engine for the internet.
Founders Sergey Brin and Larry Page created a fast-loading, clean search engine, at a time when internet speeds were slow and search engines were crowded with ads. Today, Google’s parent company, Alphabet, has a market capitalization of $4.27 trillion.
Another Company That Does 1 Thing Well
Intuitive Surgical (ISRG) creates robots. These robots don’t fold laundry, or mimic human behavior in other ways. These robots do one thing well, assisting doctors in performing surgeries.Â
Intuitive Surgical does its job so well that it controls 70% to 80% of the global soft tissue, robot-assisted surgery market. The Sunnyvale, California-based company lists Johnson & Johnson (JNJ) and Medtronic (MDT) among its chief competitors.Â
Not only do the tools made by Intuitive Surgical aid surgeons, they also shorten recovery time for minimally invasive procedures.
Let’s Get Technical
Shares of Intuitive Surgical have underperformed the market this year, losing 23% year to date. However, the stock has been creeping higher lately. Over the past month, Intuitive Surgical shares have gained over 13%, while the S&P 500 has gained just 2.4%.Â
On Monday, Intuitive Surgical closed at a three-month high. The stock is forming a series of higher lows (LH) and higher highs (HH), indicating the start of a bullish trend.
The next technical obstacles for Intuitive Surgical lie ahead at $442, the location of the stock’s 200-day moving average (red line), and $443, which represents the stock’s July 7 high (arrow).
This stock has upside potential. Despite its recent rally, Intuitive Surgical remains 30% below its all-time closing high, set in January of 2025.
The Game Plan
We are taking a small position in Intuitive Surgical at current levels. The reason for our caution is because the company’s next earnings report is scheduled for October 20, just one week from this writing.
While it’s possible that the stock’s relative strength bodes well for the upcoming earnings report, it’s not a good enough reason to go all-in at this time. It’s possible that, after a pre-earnings run-up, the stock could sell off on good news — a potential buy-the-rumor, sell-the-news scenario.
We plan to add to the position after earnings if appropriate. Ideally, I’d like to see Intuitive Surgical break above $443 and its 200-day MA before buying additional shares.
At the time of publication, Ponsi was long ISRG and JNJ.
