ISRG Stock Split: Intuitive Surgical’s stock is up for grab after being down 30% since the stock split last fall

ISRG Stock Split: Intuitive Surgical’s stock is up for grab after being down 30% since the stock split last fall
ISRG Stock split: The fantastic bull run we have seen in ISRG stock is due to strong financial performances quarter over quarter.

It has been the season of stock splits and Amazon and Alphabet Inc just made it more appealing and rewarding. Both companies went for a 20:1 stock split and investors rewarded these companies in short term for a stock split. There have been two main seasons for stock splits, one from the late 1990s to the early 2000s and then from 2021 to 2022. The stock splits targeted to make the stock available for a broader base of investors and to induce some fresh buying have done the job for various stocks to reverse the downtrend and scale the share price to new heights.

Intuitive Surgicals Inc stock (Nasdaq: ISRG) began its trading journey way back in 2000 at a minimal price of $2.03. It has given mammoth returns of 11,738.42% return since its listing on the stock exchanges and is currently trading at $240.32 (as of 8th August 2022). Although it has given a negative 30% return in last one year, but it has been very rewarding for long-term investors. Aimed at selling Da Vinci’s robotic surgical system to hospitals and a market leader in its stream, the company has gone for stock splits on two occasions in its trading history.

In this article, we will learn about the split history of ISRG stock and then look at the positives and negatives of the business, the effects of splits on share price and whether the stock split has made the stock a buy?

ISRG Stock split: Split history of ISRG stock

Intuitive Surgicals Inc went for a stock split on two occasions, one in 2017 and the other in 2021. There are few similarities between the two splits. First, both splits were effective from October of respective years. While it was October 6 in 2017, it is October 5th in 2021. More importantly, the split ratio is 3:1 on both occasions, meaning the shareholders got two bonus shares for each share held as on split effective date.

Coincidently, the share price just prior to the split is also the same and that is near to $1000. While it was $1084 on 6th October 2017, it was just a notch below $1000 at $990 on October 5th 2021. On both occasions, the split was induced when the share price was approaching $1000. While it is very logical for the companies to go for splits as their share price touches quadruple-digit levels and it has acted as a line for inducing the stock splits. $100 mark was used in the late 1990s as a mark to induce the split and that is replaced by $1000, which act as a catalyst among other factors to convince the management to go for the split.

ISRG Stock split: Performance After the Split

The split is done to reduce the share price, so that a small retail investor, who is hesitant to spend $1000 and is not comfortable in buying fractional shares, gets the required motivation to at least buy one share at the split-adjusted price. Logically after the forward split, a stock must perform better in short time frame.

For ISRG stock, it got a bullish push on both occasions. On 26th January 2018, within a quarter or so, it touched $146.75, which is gain of around 22%. If we look for a year timeline, share price touched $191 on 28th September 2018, which is an upside of almost 60% from the post-split price.

A similar trend is observed in case of 2021 split. Below is the chart showing the share price post announcement of the share split on 5th August 2021.

One can see that post announcement of the split in August, the share price remained volatile, but after 5th October, the share price jumped from $320 to $360, within a month. The downfall post is the result of high inflation-induced bear market and a couple of bad quarter results, but the split did its job of giving a short-term bullish push.

ISRG Stock split: Positives and Negatives Factors for Intuitive Surgicals Inc Business

A global leader in a growing market for surgical robots- Intuitive Surgicals Inc makes Da Vinci surgical robotic systems used for a variety of surgeries like gynecology. Today almost 6700 Da Vinci systems are installed in hospitals worldwide. Also, the company makes revenue via selling instruments and accessories needed for Da Vinci procedures. Moreover, the market for robotic surgeries is growing at a rapid rate, as of 2017, it was only $5.1 billion in the dollar industry, and it is expected to reach $12.6 billion by 2025. Intuitive holds the position of the market leader in this market with more than 71% share, with its closest rival holding only 15% share.

A supplementary expense for hospitals- Robotic surgery is still not mainstream in the medical and hospital industry. That is the reason, the company faced business disruptions during the Covid 19. At essential times, hospitals will postpone non-essential surgeries and that will impact the revenue of Intuitive. Also, as hospitals were busy handling the Covid 19 situation, they considered installing Da Vinci system as a supplementary expense worth more than $2 million per system. This is reflected in the downfall of the revenue and net income for the year 2021. This emergency situation can happen again in the future and hence robotic surgery will remain a supplementary expense for at least till this decade.

Conclusion: Does Split makes the Stock a Buy?

Coming back to the most important question: Is ISRG stock a more attractive buy due to the split? the answer is no. The split does not make a stock a buy or sell, as it does not impact the fundamentals of a company. It just lifts the sentiments of small retail investors who were on the fence of buying the stock, get an extra edge towards buying the stock. In a longer time frame, macro-economic factors of a particular country and strong fundamentals of a company dictate the share price.

The fantastic bull run we have seen in ISRG stock is due to strong financial performances quarter over quarter. Procedures, and installations of the new system after Covid disruptions are on a rise and it has given a boost to the earnings and revenue. The procedure volume continued to grow and in Q2, it reported an increase of 14% YoY. The management has been straight on point for splitting the stock after it reached $1000 twice in its trading history.

The split is a past story for Intuitive, and it is expected to split the stock again if the share price touches $1000. An investor looking to invest in ISRG stock should invest on its merit and not on the basis of a stock split.

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ISRG Stock split: The fantastic bull run we have seen in ISRG stock is due to strong financial performances quarter over quarter.

-Vineet Agarwal

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