Bernstein cuts Tandem Diabetes stock rating to Market Perform

On Monday, Tandem Diabetes Care (NASDAQ:TNDM) shares faced a downgrade from Bernstein analysts, shifting from an ’Outperform’ to a ’Market Perform’ rating. Accompanying this downgrade, the price target for the stock was also reduced to $25.00 from the previous $35.00. The revision in the company’s outlook came after several key changes were observed in the market dynamics and the company’s performance. According to InvestingPro data, the stock has already declined 32% in the past week, with nine analysts recently revising their earnings expectations downward. The company, currently valued at $1.47 billion, appears undervalued based on InvestingPro’s Fair Value analysis.

Bernstein analysts pointed out that Tandem Diabetes had lost market share in the U.S. type 1 new pump starts during the fourth quarter. This was a significant factor in reassessing the company’s position, as it indicated a weakening foothold in a critical market segment. Despite maintaining a healthy gross margin of 52% and achieving revenue growth of 25.74% in the last twelve months, the rise of new competitors, particularly Beta Bionics, has increased the competition for the number two spot in the insulin pump market, which Tandem previously aimed to secure.

The company’s recent announcement of a U.S. sales expansion and realignment, along with a transition of overseas distributors, was also cited as a potential complication for Tandem’s operations in 2025. These strategic changes could present challenges for the company as it attempts to navigate an evolving market landscape.

Lastly, Tandem’s margins in the fourth quarter fell short of expectations, raising concerns about the company’s path to achieving positive earnings per share (EPS). This financial underperformance contributed to the decision to downgrade the rating and lower the price target for Tandem Diabetes Care shares.

The adjustment in Tandem’s stock outlook reflects a recalibration of expectations in light of the company’s recent market share loss, heightened competition, strategic shifts, and financial performance concerns. Bernstein’s updated analysis suggests a more cautious view of Tandem’s prospects in the competitive insulin pump market.

In other recent news, Tandem Diabetes Care reported a positive earnings surprise for Q4 2024, with an earnings per share (EPS) of $0.01, surpassing the forecast of -$0.21. The company’s revenue reached $282.65 million, exceeding the expected $251.3 million. Despite the strong financial performance, Bernstein downgraded Tandem Diabetes Care’s stock from Outperform to Market Perform, citing concerns about market share loss and increased competition. Bernstein also reduced the price target from $35.00 to $25.00, highlighting potential operational challenges due to sales expansion and distributor transitions.

Meanwhile, Citi analysts maintained a Buy rating for Tandem Diabetes Care but lowered the price target from $50 to $35, following mixed fourth-quarter results. The company’s international sales exceeded expectations, with a significant 48.4% increase, while U.S. sales were slightly below forecast. Tandem Diabetes Care provided a 2025 revenue outlook of $997 million to $1.007 billion, slightly below the consensus estimate, factoring in potential international headwinds.

The company’s gross margin saw a slight improvement, and its adjusted EBITDA was reported at $2.3 million, below the consensus estimate. Citi analysts noted that while the targets are achievable, the guidance may exert short-term pressure on the stock. Tandem Diabetes is also focusing on expanding its presence in the Type 2 diabetes market and enhancing its product offerings, aiming for significant long-term growth.

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