If you haven’t heard of Intuitive Surgical’s (ISRG) da Vinci Surgical System, you probably will. It’s a precise way of doing delicate urologic, gynecologic, cardiothoracic, and head and neck surgeries that is less invasive and involves far less blood loss than traditional surgical methods.
The company has missed just one earnings estimate in the past six years. That came a year ago, when the company reported only 72 cents per share in profits. That makes this year’s $1.68 consensus estimate seem overly optimistic. But the company earned $1.95 last quarter, so the current forecast actually is rather beatable. And we like beatable estimates.
One thing you can say about ISRG is that it moves sharply after earnings. In fact, the stock has moved an average of nearly 14% on just the one day following each of the past four earnings reports. That kind of action makes option traders drool. And three of those past four have been positive, averaging gains of more than 16% in one day.
On the charts, ISRG has surged more than 3% in the past couple of days to sit atop all its daily moving averages. The next stop is the all-time high around $367, which was reached just last month. A post-earnings move of even half the average of recent pops should easily boost the shares into record-high territory.
Sentiment toward ISRG is surprisingly guarded. The put/call ratio is coming off a peak, which usually indicates an unwinding of pessimism that’s expressed in more buying pressure.
The same goes for short interest, which, though declining, still has a way to go to wring out the pessimists. And only 4 of 13 analysts rate the stock a “buy,” leaving plenty of room for upgrades.
With a strong product that’s on the forefront of medical technology, a history of powerful post-earnings moves, and plenty of pessimism yet to unwind, we like ISRG as a pre-earnings bullish play. The company reports on Thursday, so don’t wait too long if you want to make a play.
As a reminder, April options expire this week, so a May ISRG call is your best bet for this earnings trade.
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- Kick Off Earnings Season With This Retail Trade
- Big Names Don’t Always Make Good Earnings Trades
- 12 Keys to Trading Earnings for Profits
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