BofA Provides A Reality Check On Tandem Diabetes (TNDM)

BofA/Merrill Lynch analyst, Travis Steed, reiterated his Neutral rating on shares of Tandem Diabetes Care (NASDAQ: TNDM) and took a critical look at the valuation after the stock's ~1600% rise this year. Using a DCF, the analyst's math suggests that the stock is currently pricing in 40-50% market share in 10 years vs the roughly 5% share today. The analyst assumes that the pump market grows mid-single digits per year to around
$4-5bn and that the company can ultimately achieve 30% operating margins over this time period.

The analyst stated "Although near term Street estimates are likely to move higher, what this analysis suggests, in our view, is that to believe there is significant upside in TNDM from current levels investors would need to believe that TNDM can take well over 40-50% pump share or that the market for type 1 insulin pumps will accelerate meaningfully from current levels. We see no justifiable reason to believe TNDM can do much better than 50% market share as over a ten year period TNDM’s form factor advantages over MDT could be gone and the relative CGM advantage gap could close as well".

No change to the price target of $45.

For an analyst ratings summary and ratings history on Tandem Diabetes Care click here. For more ratings news on Tandem Diabetes Care click here.

Shares of Tandem Diabetes Care closed at $41.21 yesterday.

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