Here's Why You Should Retain Tandem Diabetes (TNDM) Now
Tandem Diabetes Care, Inc. TNDM is well-poised for growth in the coming quarters, backed by the strength of t:slim X2 based on Control-IQ technology and new product launches. In the first quarter, the top line met the high end of the company’s expectations. However, escalating operating costs and stiff rivalry are concerning.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 62.5% compared with the 3.1% fall of the industry and a 1.7% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $1.72 billion. Tandem Diabetes projects an estimated earnings growth rate of 36.9% for 2024 compared with 24.9% of the industry. In the trailing four quarters, TNDM has an average negative earnings surprise of 415.6%.
Let’s delve deeper.
Tailwinds
Q1 Upsides: Tandem Diabetes’ first-quarter revenues were in line with its expectations. The company continues to capture a competitive share in the insulin pump market on the strength of t:slim X2 with Control-IQ technology. Within supplies, TNDM witnessed an increase in cartridges and infusion set sales, with its in-warranty installed base growing to approximately 300,000 people at the end of the first quarter.
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The ongoing inventory transition to Tandem Diabetes’ European distribution center during the quarter witnessed a reduction in logistical supply chain challenges, strong international distributor relations and a closer correlation between pump shipments and pump placements on patients.
t:slim’s Strong Prospects Continue: TNDM’s flagship product, t:slim X2 with Control-IQ technology continues to make a positive clinical impact in terms of overall satisfaction and ease of use and reduces the burden of diabetes management. The company looks forward to making t:slim X2 the first FDA-cleared insulin pump integrated with multiple CGM sensors.
TNDM is working closely with Dexcom to finalize Control-IQ integration with G7 and coordinate its launch. The integration of Control-IQ technology with Abbott's FreeStyle Libre 2 and Libre 3 sensors is also underway.
Product Innovation to Contribute: We are encouraged to see Tandem Diabetes’ pipeline of new products and services for the diabetes community, set to launch in 2023. Following the FDA clearance, the company is preparing to expand the diabetes solutions portfolio through the launch of the Tandem Mobi system. The Mobi pump is about half the size of t:slim and can be operated by a smartphone through a mobile application.
TNDM is also working on t:slim X3, which is a technology upgrade to t:slim X2.
Downsides
Mounting Expenses: In the first quarter, Tandem Diabetes came out with lower-than-expected revenues and earnings. The company registered a wider adjusted operating loss compared to the prior-year quarter on a year-over-year increase of 22.6% in SG&A expenses and 27.1% in R&D expenses.
Tough Competitive Pressure: Tandem Diabetes 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 Tandem Diabetes operates limit the company’s ability to switch to strategies like price increases.
TNDM primarily competes with Medtronic’s market-leading MiniMed, a division of Medtronic. MiniMed boasts a major portion of the conventional insulin pump market share in the United States.
Estimate Trend
Tandem Diabetes has been witnessing a negative estimate revision trend for 2023. The Zacks Consensus Estimate for 2023 loss per share has moved from 94 cents to $1.03 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $885.5 million. This suggests a 10.5% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Zimmer Biomet ZBH, Penumbra PEN and Hologic, Inc. HOLX.
Zimmer Biomet has an earnings yield of 5.72% compared with the industry’s -2.31%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have increased 6.5% against the industry’s 34% decline in the past year.
ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have risen 105.2% compared with the industry’s 3% decrease over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.84% compared to the industry’s -7.06%. Shares of HOLX have risen 2% compared with the industry’s 3% fall over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
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Hologic, Inc. (HOLX) : Free Stock Analysis Report
Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
Tandem Diabetes Care, Inc. (TNDM) : Free Stock Analysis Report
