I’ve been tracking healthcare rockstar Intuitive Surgical (NYSE: ISRG) for about six months now, and have been impressed with their results… its astonishing to me that they are back to their late-October trading levels despite all of the hard work. After a terrific earnings call, including a 2008 guidance boost, shares of ISRG took a hit. Capitalize on the market’s mistake and unlock some growth!

So why exactly did ISRG slide downward after good earnings? They raised outlook, but perhaps not by enough. Kind of a ridiculous expectation, but we’ve grown accustomed to Intuitive’s 22 consecutive quarters of above-guidance outlook bumps that the $853.2 million sales forecast fell short of analyst’s $857.3 million dream. What’s more? Monday night, Jim Cramer came out on his show, CNBC’s “Mad Money,” and told us that the bullish run is done, and that you should “take gains here.”

Wrong. Wrong. Wrong.

Intuitive Surgical is fine. The fact that medical facilities are purchasing the pricey “da Vinci” robotic-surgery system sparingly in the near term is a cyclical theme… not a business problem! Hospitals loaded up on the system in the fourth quarter when it was most economical to do so… I think this is the future of surgery and everyone is going to want one in stock. Perhaps the outlandish P/E multiple will “catch up” in 2008, but its not going to stop this train from accelerating to the mid-$300 levels that it deserves to be trading around.

I’m a believer that robotic-surgery is the future, and Intuitive Surgical’s “da Vinci” program offers the best-of-breed solution. Think about it, elimination of human error and easier medical processes. This is like iRobot meets Terminator, and hey… ISRG is really bringing the heat. They sold 74 systems in the previous quarter versus an expected 68… which is a HUGE deal when each sale brings. Bottom line, these suckers are expensive, and a lot of hospitals have felt financially unable to buy them. But the tides are turning. The da Vinci Surgical System costs a rough $1 million plus maintenance and all the bells and whistles. It’s good to see the sales roll in!

So they are selling a multi-million dollar robotic system, so what? The thing is expensive, but people are paying up for the technology, which really improves things. ISRG announced a strategy to increase what they call the “field sales rep concentration” from five to four, unlocking new value where we might even see some facilities buying multiple systems. When you have each robotic arm running $175,000, you know that getting people to buy the thing is a big deal, and deserves a nice premium trading value.

I’m no technical analyst, but I’ve noticed a strange “box trend” in the stock chart. It seems to me that the stock has been traded back and forth over the last seven months between $250 and $350 with relative consistency. Well guess what, we’re back closing in on $250, and I think it’s time to get back in the game. ISRG is going to break the box soon, and I think this next run-up could do the trick. I would jump at the chance to pick them up under $268.37 (yes, that is a random number ), but you may not get the chance. The way I see it, I’m measuring about 25%-30% upside, with just 10% downside from current $282 values. Nice.

A lot of success in the future is going to stem off of how well they sell the surgical system. This may sound kind of “door-to-door salesmen” of them, but really the da Vinci system is capable of handling so many different procedures, so convincing relevant doctors that they need it is essential.

Replacement parts, recurring profits, maintenance fees, and flat-out sales have this company reeling. The fact that they couldn’t please the Street’s ridiculous expectations should be a non-factor in the long term. Intuitive Surgical is in the process of penetrating new markets, and this is one company you need to take a look at before there is a da Vinci Surgical System on every street corner.

-The Net Fool

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