Intuitive Surgical Inc. (NASDAQ: ISRG) is deep in the red this morning after Deutsche Bank issued a bearish note on the biotechnology giant based out of Sunnyvale, California.
The investment firm downgraded ISRG shares on Monday to “sell” and lowered its price target on them to $440, indicating potential downside of more than 15% from current levels.
Still, famed investor Jim Cramer dubbed Intuitive Surgical stock “one of my favourite companies” as he appeared on CNBC today.
Why is Jim Cramer bullish on Intuitive Surgical stock?
Intuitive Surgical received its first sell rating on Monday, primarily because Deutsche Bank expects rising competition from more affordable remanufactured tools to prove a meaningful headwind for the company’s “da Vinci” robot system in the years ahead.
However, Jim Cramer took a more positive stance on ISRG shares on “Squawk on the Street” as the Nasdaq-listed firm continues to report strong quarters.
According to the former hedge fund manager, Intuitive Surgical stock remains worth owning as it offers exposure to a “premier, fast-growing company.”
Jim Cramer remains bullish on the biotech stock since it has a very successful track record. ISRG is one of the best stock charts over the past 20 years, he added.
ISRG shares could benefit from razor-and-blade model
Jim Cramer likes Intuitive Surgical for its use of “razor-and-blade” business model – meaning they sell the surgical robots (like the razor) and then make ongoing revenue from selling the tools and accessories needed for each procedure (the blades).
The famed investor acknowledged that third-party companies trying to sell remanufactured tools could hurt ISRG’s profitability, but overall, he continues to see it as a high-quality business that will likely remain rewarding for investors moving forward.
In late April, the biotech firm reported its financials for the first quarter that handily topped Street estimates.
Still, Intuitive Surgical shares remain unattractive for income investors as they do not currently pay a dividend.
Is Intuitive Surgical attractive in terms of valuation?
Investors should also note that Jim Cramer is not the only expert who’s bullish on ISRG stock at current levels.
Deutsche Bank’s bearish note on Intuitive Surgical stock arrives only days after Stephanie Link, the chief investment strategist at Hightower, loaded up on the biotech name as it’s a “secular grower in healthcare … and it’s really hard to find secular growers in healthcare.”
Link also dubbed the biotech stock attractive in terms of valuation, given it’s currently down more than 10% versus its year-to-date high.
Intuitive Surgical expects its adjusted gross profit margin to be capped at 66.5% this year, down from a tad over 69% in 2024.
However, much of that expected weakness is attributed to the impact of Trump’s new tariffs.
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