rewrite this title PROCEPT BioRobotics Stock Takes a Breather. Is It a Buy? – Nanalyze

There are some things men just don’t talk about – like their emotions or women’s menstrual cycles. And we definitely don’t talk about our prostates. But the walnut-sized gland located below the bladder and in front of the poop chute is a vital cog in the male machinery. However, after a certain age, prostate plumbing can start to cause problems. One of the key malfunctions is benign prostatic hyperplasia (BPH), also known as an enlarged prostate. The additional tissue compresses the urethra and creates the feeling like you just downed a six-pack, while cruelly suffering from obstructed urine flow at the same time.

The standard treatments for BPH are not much better than the condition itself. Transurethral resection of the prostate (TURP), which sounds like it was invented by the Spanish Inquisition for the crime of sodomy, and (non shark-based) laser therapy are both thermal-based options that can cause not only urinary incontinence but also sexual dysfunction. Pharmaceutical interventions are not much better. Side effects from drugs can kill libido, cause depression and anxiety, and include the usual long list of infomercial disclaimers.  

So, it’s no surprise that PROCEPT BioRobotics (PRCT) has been posting big double-digit revenue growth since it IPO’d in 2021. Its robotic surgery platform features what the company calls Aquablation therapy, which (to put it quite crudely) involves precisely sandblasting prostate tissue away by applying a heat-free, high-pressure water jet of saline solution. The result: faster recovery and fewer side effects. Our ongoing concern about buying shares of PROCEPT BioRobotics stock has been that the near-term market is too small, too niche, and too focused on the United States. Has anything changed since we last checked in with the company more than two years ago?

Strong Revenue Growth

First of all, revenue growth is still incredibly strong. PROCEPT BioRobotics ended 2024 with total revenue of $224.5 million, an increase of 65% compared to 2023. Revenues are largely a mix of one-time system sales and recurring revenue from consumables. These sorts of razor-and-blade business models can greatly benefit companies that sell expensive high-tech equipment (the razor) because customers have to keep buying pricey disposable components (the blade) to keep using the system. Over time, as equipment placement increases, gross margins go up as recurring revenues become a bigger piece of the pie.

And that’s precisely what we’re seeing from PROCEPT BioRobotics now. Gross margins jumped from 52% in 2023 to 61% in 2024. While system sales and rentals were up 53% the previous year, sales of disposable handpieces and other disposables were up 75%. The trend continued into 2025. Consumables revenue hit $38 million in Q1-2025, up 61% year-over-year and almost 30% from Q4-2024. Consequently, gross margin hit nearly 64%. 

A New AI-Powered Robotic Surgery Platform

These numbers are a bit more complicated if we dig down another layer or two. Last year, for instance, the company introduced a successor to the AQUABEAM Robotic System, which employs a robotic arm to direct a water jet to precisely resect tissue while preserving critical (and near and dear) structures like nerves for erectile function. The new HYDROS Robotic System uses AI (of course) to map out the surgical site for even more precise procedures. The HYDROS system is quickly replacing AQUABEAM as the primary platform. In Q4-2024, 95% of the 60 robotic platforms sold were HYDROS systems, for an average selling price (ASP) of $460,000 per unit.

HYDROS also features a single-use scope for imaging. This adds a new consumable for the recurring revenue end of the business equation while ostensibly saving customers time and money on processing reusable scopes. Management did not explicitly discuss the ASP of the single-use scopes but handpieces sell for an average of $3,200 – accounting for nearly 95% of consumable sales for Q1-2025. AQUABEAM systems still represent about 80% of the installed base, so we should expect consumable revenue to go up in step with higher ASPs associated with HYDROS handpieces and new revenues from single-use scopes.

Another layer to the financial numbers, particularly from the transition between 2024 and 2025, involved (of all things) a saline shortage. Hurricane Helene, the storm that walloped North Carolina and surrounding states in late September 2024, shut down a Baxter International factory outside of Asheville. Management estimated the temporary loss of one of the largest suppliers of intravenous fluids in the United States led to 1,000 to 2,000 fewer procedures ($3.2 million to $6.4 million in disposable handpieces) in Q4-2024. In addition, about half of the hospitals that rely on Baxter IV supply delayed new Aquablation program launches until Q1-2025. 

Tariff Trouble Ahead?

While all is back on track, it’s worth keeping in mind that the numbers kicking off the first quarter of 2025 are probably higher than they would have normally been as customers caught up on postponed procedures. Investors have a short memory, so any sort of revenue slowdown in Q2-2025 revenues from Q1-2025 might elicit a short-term drop – a potential buying opportunity for those bullish on PROCEPT BioRobotics stock. 

A more directly manmade disaster via the Trump tariffs might also create some temporary buy opportunities, though management expects minimal impacts. That’s largely thanks to the fact that the company’s supply chain is not overly exposed to China. For instance, 95% of the materials used in the handpiece component are already sourced domestically in the United States. Still, if the China tariffs persist, the company expects them to shave as much as 1.5% off of its full-year 2025 projected gross margin of 64.5%. That’s because the ultrasound systems and associated components are made in the PRC. A quick end to the tariffs before the second half of the year would stave off most impacts thanks to an existing inventory of ultrasound units.

Does the TAM Justify the Stock Price?

While things like supply chain disruptions and sky-high tariffs create the quarter to quarter white noise that keeps pundits employed, we’re more interested in the long-term picture. Specifically, how long can PROCEPT continue to expand market share and grow revenues? To answer those kinds of questions, we need to circle back to our concerns about the size of the company’s total addressable market (TAM). PROCEPT has been recycling this slide from its investor deck for years with few changes:

In fact, the only change from our last article and this one is that there are 500,000 fewer “watchful waiters.” Regardless, and as we noted more than two years ago, the company’s near-term TAM is focused on the 400,000 patients who undergo BPH surgery annually. However, only about 290,000 of those are estimated to elect resective surgeries that could be done by Aquablation. Based on the current ASP of $3,200 per procedure, that’s about $1 billion with a generous round-up. Some additional back-of-the-napkin math – $152 million in annualized consumables revenue based on Q1-2025 results – tells us that the company has captured about 15% of the near-term market with about 20% penetration (according to the slide below) into hospitals that perform BPH procedures.

PROCEPT BioRobotics is pursuing other market opportunities. Specifically, the company is undertaking clinical trials to test the efficacy of its robotic surgery technology on low- to moderate-risk prostate cancer. Early results suggest Aquablation results in far fewer side effects compared to radical prostatectomy, which involves removing the whole gland. The immediate market potential is well north of $500 million but is probably a few years away from approval. Meanwhile, the company will spend between $10 and $15 million on R&D related to cancer treatment with Aquablation.

Finally, PROCEPT is making some progress internationally, projecting sales outside of the United States to grow 36% to $32.5 million this year, driven mostly by Japan and the UK. That would represent about 10% of total revenues in 2025, which management just adjusted upward in Q1-2025 to $323 million – a 44% increase. While the company is expected to continue to lose money this year, management claims it will achieve positive EBITDA by 2026 thanks to strengthening gross margins and by moderating operating expenses. 

Conclusion

PROCEPT BioRobotics stock has been on a wild run thanks to staggering revenue growth. After shares recently retreated from all time highs, the company now sports a market cap of about $3.3 billion on $276 million in annualized revenue. That gives us a simple valuation ratio (market cap/annualized revenue) of nearly 11, almost double our catalog average. Seems acceptable given the growth on offer, but can that growth be sustained over time? We’re seeing a a niche market with a limited near-term ceiling which remains a concern. Investors in this thesis should also consider the leader in robotic surgeries, Intuitive Surgical (ISRG). It’s more richly priced, but there’s a good reason for that.