Intuitive Surgical downgraded, so what?

Intuitive Surgical (ISRG) was downgraded by Wachovia on Jan 8. Next day, Jim Cramer said to sell it during Lightning Round.

This is completely wrong!

Main reason for downgrade: hospitals would spend less on expensive equipment during weak economy and possible recession. Wachovia (and Cramer) just underestimate ISRG product, Da Vinci robotic surgical system. Most analysts think it's only good for some specific operations, like prostatectomy and hysterectomy. In reality, this system can be used for almost all internal organ operations. There are reports of successful kidney cancer removal and mitral valve repair. Arithmetics is simple: patients spend much less time recovering and spending time in hospital after operation. Insurers are usually paying the same money for the same operation, so Da Vinci system saves money on every operation. Add reduced risk of litigation because of reduced risk of post-operational complications. As a result, hospitals really save money using Da Vinci.

System penetration is still low outside of US. Intuitive surgical has a lot of room to grow. That is, with Da Vinci. Company might just invent something else or buy some new inventions.

Analysts have a history underestimating ISRG. Earnings estimates were usually beaten by up to 100% in 2005-2006.

I bought ISRG in 2006 for about 115 average. Now I enjoy current price. I still think ISRG is a buy, strong buy under 250.

Full disclosure: at the time of publication author had long position in ISRG. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.