Intuitive Surgical (ISRG)

In Q3, da Vinci placements supported by capital lease programs increased sequentially from 15% to 20% of the total. Given hospital budget constraints that percentage could increase further. At the same time, given the tighter credit market the capital leasing companies will increase their rates significantly if they chose to take on the capital risk of the machine at all. This could hamper device placements through year end forcing the street to lower numbers. Currently ISRG trades at 25x'09 street consensus of $7.22. If they miss the placement estimates, downside could be 22x $7 or roughly $150.

First, the 'news' that the company's CEO stated during a conference Thursday morning that slower growth and lower margins for the company loomed dead ahead, which caused traders and investors to sell hard, was later refuted to be rumor. Then the share price closed spot-on at multiple levels of support (200 day sma included), setting up the possibility for a downside price gap on Friday's open.

In late May 2008, however, came news that Intuitive Surgical will become a member of the S&P 500 index, which news typically causes index funds to purchase immediately the shares of the new addition. Intuitive Surgical shares reacted accordingly to the sudden onslaught of buy orders by surging to ~$287, and continued near that level Friday morning in pre-opening trades.

But how likely will ISRG be to hold these levels, and not turn lower once again? Remember that the shares have merely reversed, at worst temporarily, and not broken above any levels of resistance.

P/E ratio is very high