On Wednesday, RBC Capital initiated coverage on Tandem Diabetes Care (NASDAQ:TNDM) stock, assigning an Outperform rating and setting a price target of $65.00.
The firm's analysis suggests a significant potential for stock appreciation, driven by a combination of earnings growth and expansion of the stock's trading multiple.
According to RBC Capital, the earnings upside for Tandem Diabetes is expected to come from the adoption of the company's Mobi insulin delivery system, integration with continuous glucose monitoring (CGM) technology, and the expansion of its Type 2 diabetes indications. These factors are anticipated to contribute to an increase in new patient starts and insulin pump renewals.
The firm also projects that Tandem Diabetes Care's stock could experience an expansion in its trading multiple, at least to the average historical enterprise value to next twelve months (EV/NTM) sales ratio. This expansion is expected as the company's revenue catalysts become more apparent and its profitability improves.
RBC Capital's coverage notes that the global insulin pump market remains significantly underpenetrated, which presents a substantial opportunity for Tandem Diabetes. The firm's research and checks also indicate that the growing use of GLP-1 treatments is unlikely to disrupt the global insulin pump market's potential.
In other recent news, Tandem Diabetes Care announced significant second-quarter sales for 2024, reaching $222 million, largely due to the successful launch of the Tandem Mobi pump platform. The company's year-to-date sales reached $415 million, aligning with its 15% sales growth target for the year.
Tandem also projects 2024 sales to range between $885 million and $892 million, with a 51% gross margin and breakeven adjusted EBITDA. However, Citi initiated a 90-day Negative Catalyst Watch on Tandem, influenced by data indicating that Tandem's market share of new patient starts is expected to remain relatively unchanged for the third quarter of 2024.
Analyst firms Stifel, Lake Street Capital Markets, and Canaccord Genuity maintained their Buy ratings on Tandem, while Morgan Stanley assigned an Equalweight rating.
These recent developments underline Tandem's commitment to leveraging advancements in automated insulin delivery technology and expanding its market presence.
InvestingPro Insights
Recent data from InvestingPro adds further context to RBC Capital's optimistic outlook on Tandem Diabetes Care (NASDAQ:TNDM). Despite the company's current lack of profitability, with a negative operating income of $150.44 million over the last twelve months, TNDM's stock has shown remarkable resilience. The company's shares have delivered an impressive 86.77% total return over the past year, suggesting strong investor confidence in its future prospects.
InvestingPro Tips highlight that management has been aggressively buying back shares, which often signals a belief in the company's undervaluation or future growth potential. This aligns with RBC Capital's view on potential stock appreciation. Additionally, TNDM operates with a moderate level of debt and its liquid assets exceed short-term obligations, providing financial flexibility as it pursues growth opportunities in the underpenetrated insulin pump market.
It's worth noting that InvestingPro offers 7 additional tips for TNDM, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable given the complex dynamics of the diabetes care market and the potential impact of emerging treatments like GLP-1.
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