Investing.com -- RBC Capital initiated coverage of Tandem Diabetes Care (NASDAQ:TNDM) with an Outperform rating in a note Wednesday, highlighting the stock’s attractive risk-reward profile.
According to RBC, which set a $65 price target on the stock, Tandem has "significant upside potential" driven by key growth catalysts such as increased adoption of its Mobi insulin pump, integration with continuous glucose monitors (CGMs), and expansion into the Type 2 diabetes market.
RBC Capital believes that TNDM’s growth will be fueled by several factors, including U.S. Mobi adoption, which will drive new patient additions, and a significant renewal opportunity, with over 90,000 pump warranties expiring in 2024.
Additionally, they believe the integration of CGMs like the Libre 3 in 2025, and the expansion into the Type 2 diabetes market, which has 2.5 million potential patients, will further boost revenue.
Despite the growing popularity of GLP-1 therapies, RBC Capital does not believe they pose a threat to Tandem’s growth.
The bank explains that GLP-1s do not reverse the beta cell loss in Type 1 diabetes, and while they can slow the progression of Type 2 diabetes, pumps still play a critical role in glycemic control.
"GLP-1 popularity could even aid earlier Type 2 diagnosis, and insulin intervention, expanding the market," says RBC.
The bank sees room for multiple expansion, with Tandem trading at a discount compared to historical averages. With a potential upside of 58%, RBC believes that TNDM’s earnings growth and increasing profitability make it an attractive investment opportunity.