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Here's Why You Should Hold on to Tandem Diabetes (TNDM) Stock

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Tandem Diabetes Care, Inc. (TNDM - Free Report) has been gaining on robust domestic and international pump sales. Its better-than-expected revenues in the third quarter of 2020 buoy optimism. However, continued impact of the pandemic on the company’s international markets and heavy dependence on insulin pumps are concerning.

Over the past year, the Zacks Rank #3 (Hold) stock has outperformed its industry. The stock has gained 53.3% compared with 15.9% growth of the industry and 15.1% rise of the S&P 500.

The renowned designer, developer and distributor of insulin pumps has a market capitalization of $5.79 billion. The company expects to maintain strong product performance. The company surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average surprise being 35.81%.

Let’s delve deeper.

Strong Q3 Results: We are upbeat about Tandem Diabetes’ better-than-expected revenues in the third quarter of 2020. A robust top line despite pandemic-led business disruptions is impressive. Strong domestic and international pump sales, along with robust domestic pump shipments, buoy optimism. Continued strength in demand for t:slim X2 insulin pump across the globe and rising customer adoption of the company’s Control-IQ technology look encouraging. The company’s full-year sales forecast also looks upbeat amid the coronavirus crisis.

Strategic Deals: Tandem Diabetes’s recent buyouts and partnership deals buoy optimism. In July 2020, the company entered into a non-exclusive patent cross-license agreement with Medtronic plc (MDT - Free Report) for certain technologies in the field of diabetes. Further, in the same month, Tandem Diabetes announced a new national partnership with JDRF (a global organization funding type 1 diabetes research) to help drive awareness and education on topics related to technology innovation, diabetes management and healthcare for people with diabetes.

In June, Tandem Diabetes announced the finalization of its diabetes care deal (proposed in October 2019) with Abbott Laboratories (ABT - Free Report) , which will enable the companies to integrate Abbott's FreeStyle Libre continuous glucose-monitoring technology with Tandem Diabetes’ insulin-delivery systems for enhanced diabetes management.

Product Pipeline: Tandem Diabetes launched its first-generation mobile app domestically as well as commenced the international launch of t:slim X2 with Control-IQ technology during the third quarter of 2020. Other products like mobile bolus feature for the t:slim X2, new t:sport pump platform and algorithm advances are currently in the company’s pipeline.

The company had initiated the international launch of its second-generation AID system — t:slim X2 with Control IQ in the second quarter of 2020. Further, the company is currently focusing on bringing three new products and features to the market in the United States, including the future edition of the mobile bolus-delivery feature through an app and the clearance of the t:sport insulin-delivery system. Notably, the launch of t:connect mobile app is currently underway.


Coronavirus Impact: Tandem Diabetes’ international shipments declined in the third quarter of 2020. Further it expects to continue to witness a greater proportional impact on its international markets due to an increased variability caused by the pandemic. The reason behind this is the resurgence of the infection in some areas along with stringent precautionary measures in others. Moreover, the difference in the diabetes care model outside the United States is also leading to a variability in shipments as patients are more often attended through the hospital systems and the use of telehealth is not as widely adopted.

Heavy Dependence on Insulin Pumps: Tandem Diabetes generates a large portion of revenues from sales of insulin pumps. In fact, at present the t:slim X2 hardware platform represents 100% of the company's new pump shipments. Thus, any factor that negatively impacts sales of these products may adversely affect the company's business, financial condition and operating results. Also, sales of any of the current or future insulin pump products with continuous glucose monitoring technology integration are subject to the continuation of applicable agreements with Dexcom or other third parties. These, under some circumstances, may be subject to termination, with or without cause, on relatively short notice, thus impacting the company's revenues.

Estimate Trend

Tandem Diabetes has been witnessing a negative estimate revision trend for 2020. Over the past 90 days, the Zacks Consensus Estimate for its loss per share has widened from a loss of 51 cents per share to a loss of 71 cents per share.

The Zacks Consensus Estimate for fourth-quarter 2020 revenues is pegged at $141.1 million, suggesting a 30.2% rise from the year-ago reported number.

Key Pick

A better-ranked stock from the broader medical space is Hologic, Inc. (HOLX - Free Report) . Hologic’s long-term earnings growth rate is estimated at 17.4%. The company presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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