The market is about right about the balance between durable growth and cheaper instruments. My $428.21 twelve-month target preserves a substantial franchise premium, but longer instrument lives could slow revenue before lower costs attract more procedures.
Key points
- 14% procedure growth in Q3 2026 supports durable demand, not acceleration.
- $10.71 a share is my 2027 earnings estimate, retaining stock compensation.
- $428.21 a share is my twelve-month target; the growth opportunity supports Hold.
The call
The market is about right after the earnings decline. At 40 times earnings, the verified price requires $10.20 a share in 2027. With my operating-margin assumption, that means $12.81 billion of annual revenue. The real debate is whether cheaper instruments attract enough additional surgery to offset lower sales per use.
What separates reported and adjusted operating profit ($ millions)Source: October 20, 2026 earnings release; Q3 2026. Total is company non-GAAP operating profit.
Growth should continue, but the financial payoff will take time. I forecast 14% procedure growth in 2027, offset by 4% lower instrument revenue per procedure. Platform upgrades and service contracts support the remainder. January’s outlook and the first-half instrument rollout should reveal whether affordability expands demand or mainly reduces revenue.
Valuation
| Driver | My estimate |
|---|
| 2027 revenue | $13.48 billion |
| 2027 operating margin | 34% |
| 2027 earnings per share | $10.71 |
| Core earnings multiple | 32 times |
| Surgical-franchise premium | 8 additional times |
| Twelve-month target | $428.21 a share |
The combined 40-times multiple rewards surgeon training, recurring purchases and platform breadth; stronger competition or restrictions on instrument sales would erode that premium. Earnings retain employee stock costs, exclude exceptional litigation and refunds, and assume a 22% tax rate with 348 million diluted shares. At unchanged earnings, 32 times implies $343 while 44 times implies $471, leaving insufficient upside for Buy.
Risks
- Cheaper instruments could stimulate demand faster than expected; watch procedure growth and instrument sales together.
- Hospital financing costs and insurance restrictions could suppress adoption; watch utilization rather than replacement-system placements.
- The settlement’s undisclosed operating restrictions could weaken instrument economics; watch the court-approved terms. First-half operating cash flow was strong, but included substantial stock compensation.
What would change my mind
Two consecutive quarters of procedure growth above 16% with stable instrument revenue per procedure would justify a higher earnings forecast and target.