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Tandem Diabetes Care Positioned For 20-30% Growth, But Valuation Warrants Neutral Stance

Shanthi Rexaline

Medical device maker Tandem Diabetes Care Inc (NASDAQ: TNDM) has high growth potential, but its upside could be limited by valuation, according to Bank of America Merrill Lynch.

The Analyst

Analyst Travis Steed upgraded Tandem Diabetes from Underperform to Neutral and hiked the price target from $2 to $45.

The Thesis

Tandem Diabetes' balance sheet is no longer a major concern, and there are "multiple levers to drive 20-30-percent growth for several years," Steed said in a Friday note. (See the analyst's track record here.) 

The company has a superior product in its insulin pump, with renewals contributing to upside, the analyst said.

Steed sees an incremental opportunity in the company's expansion into international markets. 

When the company's Control-IQ products become commercially available in 2019, the analyst said Tandem may even have an opportunity to disrupt Medtronic PLC (NYSE: MDT)'s exclusive deal with UnitedHealth Group Inc (NYSE: UNH).

Yet BofA noted that the shares are already trading at 11 times its 2019 revenue estimate, keeping the firm on the sidelines. 

BofA forecast 2018 sales of $146 million and 42-percent year-over-year growth, with the potential for $15 million in upside.

The Price Action

Tandem Diabetes shares have appreciated over 1,500 percent year-to-date.

The stock was losing 1.53 percent to $38.02 at the time of publication late in Friday's session. 

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Photo courtesy of Tandem Diabetes Care. 

Latest Ratings for TNDM

Date Firm Action From To
Aug 2018 Dougherty Initiates Coverage On Buy
Aug 2018 Bank of America Upgrades Underperform Neutral
Jul 2018 Stifel Nicolaus Maintains Hold Hold

View More Analyst Ratings for TNDM
View the Latest Analyst Ratings

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