Goldman Sachs told investors to buy Intuitive Surgical shares because robot-assisted procedures will double in the next two years. The firm initiated coverage on the surgical robot maker with a buy rating.
Intuitive Surgical is one of the best-performing stocks in the market this year. The company's shares are up 34 percent year to date compared with the S&P 500's 7 percent return.
"With less than 4 percent of U.S. surgeries employing robotics today, we think investors should own this structural winner as the market doubles in the next few years," analyst Isaac Ro wrote in a note to clients Tuesday. "We think emerging markets are underappreciated and near-term concerns on competition are overblown given ISRG's proven outcomes/ease."
His Intuitive Surgical 12-month price target is $1,000, representing 18 percent upside from Monday's close of $850.67.
Ro predicts robot-assisted procedures will rise by 100 percent in the next two years due to increasing usage during hernia and gall bladder surgeries. He also noted that less than 3 percent of tier-three (facilities with more than 500 beds) hospitals in China have an Intuitive Surgical robot system.
"As the Tier 3 hospital market in China is the same size as the entire U.S. hospital market, we think the long-term opportunity to expand the installed base in China is significant and underappreciated," he wrote.
As a result, Ro estimates Intuitive Surgical will generate earnings per share of $23.87 in 2017 and $27.30 in 2018 compared with the Wall Street consensus of $23.60 and $27.08, respectively.
"We see new product cycles, an expanding platform, high hurdles for physician training, and significant financial resources as tail winds to ISRG's competitive position," the analyst wrote.
— CNBC's Michael Bloom contributed to this story.