Intuitive Surgical's (ISRG) competitors face unique workflow challenges and real estate issues that impact their long-term appeal, while customized price-volume contracts complicate competitors' return on investment and its flexible per-click model allows growth opportunities in key international locations, Oppenheimer said Wednesday.

Field checks suggest a two-pronged strategy for extending instrument use, with da Vinci deployed at nearly 100 of 800 ambulatory surgery centers in the US and its per-click model improving ROI for these centers while also improving long-term gross margins. Moreover, the threat from refurbished instruments remains insignificant in key end-markets, according to the note.

However, international markets represent nearly 34% of overall sales and 38% of all procedures. Homegrown Chinese platforms pose the biggest threats to pricing and market share. Da Vinci also needs to expand into lower acuity surgeries, which are more price sensitive and require aggressive leasing and price-volume incentives, the note added.

Oppenheimer said the aggregate robotic surgery market could grow to 5.5 million procedures by 2030. Intuitive Surgical is expected to hold approximately 75% of the US market and 70% of the international market share. The company's tactic of flooding the zone with operating leases and customized contracts puts US competitors at a financial disadvantage, the brokerage said.

However, risk adjustment for a saturated US market and lower-acuity, non-essential cases is required, the brokerage added.

Oppenheimer upgraded Intuitive Surgical's rating to outperform from perform with a price target of $500.

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