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Tandem (TNDM) Global Growth Strong, Costs Continue to Rise

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On May 13,  we issued an updated research report on Tandem Diabetes Care, Inc. (TNDM - Free Report) . The company's expansion initiatives in the global markets are a major positive. However, its heavy dependence on the sales of insulin pumps and recurring operating losses raise concerns. Tandem Diabetes currently carries a Zacks Rank #3 (Hold).

Tandem Diabetes delivered better-than-expected results for the first quarter of 2021. The robust top-line growth amid post-pandemic business recovery is impressive. Strong domestic and international pump sales along with robust domestic and international pump shipments buoy optimism. Continued strength in demand for t:slim X2 insulin pumps across the globe and rising customer adoption of the company’s Control-IQ technology look encouraging. A robust product pipeline is also impressive.  Expansion of both margins and a raised 2021 sales forecast bode well for the stock.

On last quarter’s earnings call, the company noted that it is planning to launch Control-IQ in Canada during the first quarter and also in Germany and France in late 2021. Further, the company stated that it is working toward Type 2 indication for Control-IQ as well.

In terms of international growth, in the first quarter of 2021, Tandem Diabetes witnessed high international demand for the t:slim X2 pump. The pump’s shipments to international market exceeded the company’s expectations, reaching 8,700 for the quarter.

However, heavy dependence on insulin pumps and stiff competition is a concern. Further, the continued impact of the pandemic on the company’s international operations poses a threat.

Also, the company incurred operating loss in the reported quarter on rising expenses. In the reported quarter, selling, general and administrative expenses rose 17.8%. Research and development expenses rose 22.7% on continued focus of the company to drive its long-term sales and profitability initiative.

Tandem Diabetes has been underperforming the industry for the past year. The stock fell 3.8% against the industry’s 19.2% rise.

Key Picks

A few better-ranked stocks from the broader medical space are National Vision Holdings, Inc. (EYE - Free Report) , Owens & Minor, Inc. (OMI - Free Report) and Envista Holdings Corporation (NVST - Free Report) . While National Vision and Owens & Minor sports a Zacks Rank #1 (Strong Buy), Envista Holdings carries a Zacks Rank 2 (Buy). You can see the complete list of Zacks #1 Rank stocks here.

National Vision has a projected long-term earnings growth rate of 12%.

Owens & Minor has a projected long-term earnings growth rate of 15%.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

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