Tandem Diabetes Care, Inc. TNDM is well-poised for growth in the coming quarters due to innovative product offerings, which continue to gather remarkable enthusiasm. The upcoming scaling of multiple new products is expected to be a huge catalyst for the company’s growth and ability to lead diabetes management. A strong solvency is an added upside.
However, Tandem Diabetes’ operations are highly dependent on the market acceptance of insulin pumps and related products. Competitive pressures are concerning too.
In the past year, this Zacks Rank #3 (Hold) stock has declined 60.1% compared with the 3.6% fall of the industry and a 15.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $1.02 billion. Tandem Diabetes projects an estimated earnings growth rate of 37.6% for 2024 compared with the 23.2% of the industry. In the trailing four quarters, TNDM delivered an average earnings surprise of 18.3%.
Let’s delve deeper.
Impressive Product Innovation Continues: Tandem Diabetes is currently undergoing a transitional time as it prepares for the next phase of growth through its innovative portfolio. The anticipation around the launch of Tandem Mobi has started to build and is already generating incredible interest among healthcare providers, people using multiple daily injections (MDI) and current pumpers.
The company’s flagship product, the t:slim X2 with Control-IQ technology, continues to stand out as the number-one rated automated insulin delivery (AID) system. Also, TNDM made great progress in the early release phases of the DexCom G7 integrated system to the market. Management is also working to bring the t:slim X2 with Abbott’s FreeStyle Libre 2 sensor to the United States in the late fourth quarter.
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Strong Solvency: On the liquidity front, Tandem Diabetes looks well-placed. The company exited the third quarter of 2023 with cash and cash equivalents and short-term investments of $498.2 million, while it did not report any short-term payable debt. The total debt of $285 million at the third quarter-end was also much less than the corresponding cash balance.
Bright Prospects of the Diabetes Market: An aging population, unhealthy lifestyle, rising awareness and higher expenditure on health care are likely to continue driving the highly competitive diabetes market. Tandem Diabetes' near and long-term strategy focuses on meaningfully expanding the adoption of the insulin pump by people with type 1 diabetes across all its markets and producing more evolved products and services to attract people living with type 2 diabetes who use insulin-intensive therapy.
Heavy Dependence on Insulin Pumps: Tandem Diabetes generates a large portion of revenues from the sale of insulin pumps. Hence, any factors that negatively impact the sale of these products or result in sales increasing at a much slower pace could adversely affect the company’s business, financial condition and operating results. In the third quarter of 2023, pump sales accounted for 43% of Tandem Diabetes’ total sales worldwide.
Tough Competitive Pressure: TNDM operates in a highly competitive environment dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, competitive and regulatory conditions in the markets where the company operates limit its ability to switch to strategies like price increases. In addition, several companies have been developing and marketing their insulin delivery systems and related software applications, including insulin pumps and Bluetooth-enabled insulin pens, to support MDI therapy.
The Zacks Consensus Estimate for Tandem Diabetes’ 2023 loss per share has moved from $1.81 to $2.03 in the past 30 days and to $2.10 in the past seven days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $761.3 million. This suggests a 4.9% fall from the year-ago reported number.
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Insulet PODD and DexCom DXCM.
Haemonetics has an estimated earnings growth rate of 27.1% for fiscal 2024 compared with the industry’s 17.2%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 5.3% against the industry’s 6.3% fall in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Insulet, sporting a Zacks Rank #1 at present, has a long-term estimated earnings growth rate of 41.5% compared with the industry’s 12.2%. Shares of the company have decreased 48% compared with the industry’s 6.4% decline over the past year.
PODD’s earnings surpassed estimates in all of the trailing four quarters, the average surprise being 126.9%. In the last reported quarter, it delivered an average earnings surprise of 58.3%.
DexCom, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 33.6% compared with the industry’s 14.3%. Shares of DXCM have fallen 18% compared with the industry’s 3.6% decline over the past year.
DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%. In the last reported quarter, it delivered an average earnings surprise of 47.1%.
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