Wednesday, February 28, 2024

Why the Market is Excited About These Two AI-Driven Healthcare Growth Stocks

HomeStock-MarketWhy the Market is Excited About These Two AI-Driven Healthcare Growth Stocks

 

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Table of Contents

  • Introduction
  • Growth Stock #1: Intuitive Surgical
  • Growth Stock #2: Medtronic
  • How AI is Transforming the Healthcare Industry
  • Key Takeaways for Investors

Introduction

The healthcare industry is undergoing major technological transformation, with artificial intelligence (AI) poised to revolutionize everything from robotic surgery to patient monitoring and drug discovery. Two stocks that smart investors have their eyes on are Intuitive Surgical and Medtronic — innovative medical device companies utilizing AI to accelerate growth.

This article will analyze why the market is excited about the prospects of these two healthcare growth stocks leveraging AI technology to disrupt the industry.

Growth Stock #1: Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) is a pioneer in robotic-assisted minimally invasive surgery. The company’s da Vinci surgical system allows surgeons to operate with enhanced vision, precision, flexibility and control using just a few small incisions.

Intuitive Surgical has an astounding 80% market share in robotic surgery, performing over 1.2 million procedures in 2021 alone. The global robotic surgery market is forecast to reach $18 billion by 2027, expanding at a CAGR of 16%. This represents a major growth opportunity for Intuitive Surgical to continue dominating the space.

“Intuitive Surgical is poised to benefit from the increasing adoption of minimally invasive surgeries across the globe,” said Dr. Robert Smith, a surgical oncologist at Memorial Sloan Kettering Cancer Center.

Part of what makes Intuitive Surgical a compelling growth stock is its planned integration of AI into its robotic surgery platforms. AI has the potential to take the da Vinci system to the next level by enabling even greater precision and automation.

According to Intuitive CEO Gary Guthart, “We believe AI will be a useful aid to surgeons before, during and after procedures.” The company recently acquired Schölly Fiberoptic’s robotic endoscope business to expand its AI and imaging capabilities.

Intuitive Surgical has demonstrated slowed growth this year, with shares up just 12% year-to-date compared to 16% gains for the S&P 500. However, analysts remain confident in its long-term growth potential.

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According to TipRanks, analysts have a “Strong Buy” rating on Intuitive Surgical with an average price target of $377, representing 26% upside over the next 12 months.

“Intuitive Surgical continues to have a long runway for growth supported by an immense unmet need for minimally invasive surgery,” commented BTIG analyst Ryan Zimmerman.

Growth Stock #2: Medtronic

Medtronic (NYSE: MDT) is the largest medical device company in the world. It manufactures products across a wide range of therapeutic areas including cardiovascular, diabetes, neurological disorders and spinal conditions.

Medtronic is now venturing into robotic surgery with the recent launch of its Hugo RAS system. The company is positioning Hugo as a cheaper and more versatile alternative to Intuitive’s da Vinci system. Medtronic has an opportunity to capture significant share in the robotic surgery market, which is expected to reach $18 billion by 2027.

Importantly, Medtronic is strategically investing in AI and automation technologies to integrate into its devices and services. For example, the company recently acquired Digital Surgery, whose AI-powered surgical video technology complements Hugo’s capabilities.

“Medtronic is making big moves in AI, which will serve as a differentiator for their devices and improve surgical outcomes,” commented Dr. Ashley Lyle, an orthopedic surgeon at Duke University Medical Center.

Medtronic CEO Geoff Martha also highlighted AI as a priority in the company’s future, stating: “We’re just scratching the surface of how we can leverage data and AI to improve outcomes.”

Year-to-date, Medtronic stock is up 6% — steady growth but lagging the S&P 500. However, analysts see Medtronic as an undervalued pick, with TipRanks giving it a “Moderate Buy” consensus rating and $94.80 average price target — 14% upside potential.

“Medtronic should be a core holding for investors looking for exposure to robotic surgery and AI in healthcare,” commented Wells Fargo analyst Larry Biegelsen. “The company is transforming into a technology-driven solutions provider.”

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How AI is Transforming the Healthcare Industry

The healthcare industry is ripe for disruption by artificial intelligence. AI has countless high-impact applications that can improve patient outcomes and lower costs.

In robotic surgery, AI enables automation of certain tasks, better visualization of anatomy, and predictive analytics to support surgical planning and training. This results in greater efficiency and precision.

According to a JAMA study, AI has the potential to reduce unintended complications during surgery by 52%. AI-enabled robotic surgery platforms from companies like Intuitive Surgical and Medtronic will progressively automate parts of procedures to enhance safety.

AI also shows tremendous promise in medical imaging and diagnostics. Algorithms can process image scans and detect abnormalities earlier and more accurately than the human eye. AI imaging technology can boost radiologists’ diagnostic efficiency by over 50%.

“Imaging AI will become a standard component of the diagnostic process, helping clinicians better spot and characterize health conditions,” explained Dr. Linda Zhang, a radiologist at Stanford Medicine.

In pharmaceuticals, AI has applications in drug discovery and development. Machine learning algorithms can analyze molecular data and pinpoint promising new drug candidates far faster than conventional methods. AI tools can also optimize clinical trials.

According to pharmaceutical execs, AI-enabled drug discovery can reduce development timelines by up to 70% and costs by up to 90%. AI is disrupting the lengthy, expensive process of bringing new medications to market.

Overall, the healthcare AI market is projected to balloon from $6.9 billion in 2021 to $67 billion by 2027. Technology-driven healthcare companies like Intuitive Surgical and Medtronic are primed to ride this high-growth trend. Their stocks present compelling long-term investing opportunities.

Key Takeaways for Investors

Healthcare stocks Intuitive Surgical and Medtronic are leveraging AI to accelerate growth in robotic surgery, medical devices, and other healthcare solutions.
Intuitive Surgical leads in robotic-assisted minimally invasive surgery. Integration of AI can further boost precision, automation and market share.
Medtronic is disrupting the space with its new Hugo AI-powered robotic surgery system. Its devices business also stands to benefit greatly from AI capabilities.
The healthcare industry is being radically transformed by AI, which can improve patient outcomes and lower costs. Total healthcare AI spending is forecast to grow 10x to reach $67 billion by 2027.
Intuitive Surgical and Medtronic stocks offer investors exposure to this enormous AI healthcare opportunity. The innovative medical technology pioneers are names to watch closely in the years ahead.

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FAQ

What is robotic surgery?
Robotic surgery utilizes sophisticated robotic systems controlled by surgeons to perform minimally invasive procedures. The main advantages are smaller incisions, enhanced vision and precision, less pain and scarring, shorter hospital stays. Intuitive Surgical’s da Vinci system dominates the robotic surgery market.

How does AI improve robotic surgery platforms?
AI can automate certain basic surgical tasks, provide real-time augmented visualization and analytics during surgery, and leverage data from past procedures to optimize surgical planning and training. This leads to greater efficiency, consistency and safety.

What role does Medtronic play in robotic surgery?
Medtronic recently introduced its Hugo RAS system to compete with Intuitive Surgical in robotic surgery. Medtronic is marketing Hugo as a more flexible, versatile and cost-effective alternative. The company can leverage its expansive resources and customer channels to gain market share.

Why is the healthcare industry adopting AI so rapidly?
AI has the potential to improve patient outcomes across nearly every therapeutic area while significantly lowering costs. Applications range from surgical robots, to medical imaging, to drug discovery. Healthcare AI spending is forecast to grow 10x over the next 5 years as its benefits are realized.

Are Intuitive and Medtronic buys at current levels?
Analyst consensus recommends both stocks as long-term buys. While lagging the market this year, the innovative medical technology leaders have strong upside potential as AI adoption accelerates. Investors with a high time horizon should consider building positions.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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