Tandem Diabetes Care (NASDAQ:TNDM) produces advanced diabetic devices like CGM systems and insulin pumps. The company has recently posted top and bottom-line beats for the first quarter, and the stock is up over 75% year-to-date. However, it could face fierce competition from Drugs like Ozempic and Wegovy, both made by Novo Nordisk (NYSE:NVO), which have shown effectiveness in managing obesity and type 2 diabetes and are anticipated to expand significantly, potentially reaching $100 billion by 2030 for weight management alone.
Tandem’s stock-rich valuation suggests upside growth is priced in, and with the potential for competition, investors may want to observe market dynamics further before taking a position.
Tandem’s Pump Innovation
Tandem Diabetes Care is a leading innovator in insulin pump technology. The company has developed several pioneering pump models, including the t:slim X2 and the recently introduced Mobi pump. Most of their revenue stems from pump sales and a significant contribution from disposable infusion sets.
In the first quarter of 2024, Tandem expanded its product portfolio, launching Tandem Mobi with Dexcom G6 CGM sensor integration and t:slim X2 integrated with the Abbott Freestyle Libre 2 Plus CGM sensor, both in the U.S. market. Simultaneously, Tandem also initiating a launch of t:slim X2 with Dexcom G7 sensor integration outside the U.S.
Additionally, the company received FDA clearance to increase the usage of the Tandem Mobi pump in individuals aged two years and older, and it commenced enrollment for an extended wear infusion set clinical trial.
Tandem’s Recent Financial Results
The company recently announced financial results for Q1 2024. The company experienced a 9% increase in worldwide pump shipments, ranging from 23,000 to 25,000 pumps, helping to drive a revenue increase of 13.2% year-over-year to $191.67 million, beating consensus estimates by $18.13 million. GAAP EPS of -$0.65 surpassed the market’s prediction by $0.12.
The company has recently finalized a $316.3 million senior convertible notes offering, which will be chiefly used for repurchasing existing senior convertible notes. A $275.0 million aggregate principal amount of the 1.50% Convertible Senior Notes is set to mature in 2029. Tandem has also granted its initial note purchasers an option to purchase an additional $41.25 million aggregate principal amount of notes within 13 days of issuance. The net proceeds of the offering will be used to pay the $13.8 million cost of capped call transactions, repurchase $246.7 million of its 1.50% Convertible Senior Notes due 2025, and repurchase roughly $30.0 million of common stock.
Management revised its 2024 financial guidance, estimating its non-GAAP sales to be $868 million for the entire year and $205 million for Q2. The predicted sales in the United States are around $634 million for the whole year and $150 million for Q2. In comparison, sales outside the United States are projected to reach approximately $234 million for the year and $55 million in Q2.
What Is the Price Target for TNDM Stock?
Analysts following the company have been mostly bullish on the stock. Redburn Atlantic analyst Issie Kirby recently initiated coverage of Tandem with a Buy rating and $60 price target, noting the company’s growing market share in the durable pump market, thanks to its highly regarded t:slim X2 and focus on interoperability.
Tandem Diabetes is rated a Strong Buy based on the recommendations and price targets issued by 13 analysts over the past three months. The average price target for TNDM stock is $51.33, representing a -1.25% change from current price levels.
The stock has been trending upward, climbing over 14% in the past month. It trades at the high end of its 52-week price range of $13.82-$53.69 and continues to show positive price momentum, trading above its 20-day (47.34) and 50-day (40.93) moving averages. The stock is richly valued with a P/S ratio of 4.4x compared to the Healthcare sector average of 1.95x and the Medical Devices industry average of 4x.
TNDM in Summary
With its pioneering insulin pump technology and increasingly diversified product portfolio, Tandem Diabetes is a market leader in advanced diabetic devices. The company’s recent expansion into new markets, research and development investment, and the Tandem Mobi pump clearance suggest a continuing growth trajectory.
Yet, Tandem’s stock valuation suggests its growth may be priced in. Further, competitive pressures from alternatives like weight loss drugs may challenge future growth. Investors may want to watch these trends develop further to determine if the stock is an attractive long-term opportunity.
