Mizuho sets Tandem Diabetes stock at Neutral with $20 target

On Wednesday, Mizuho (NYSE:MFG) initiated coverage on Tandem Diabetes Care (NASDAQ:TNDM) with a Neutral rating and a price target of $20.00. Currently trading at $17.61 with a market cap of $1.17 billion, the company maintains a "Fair" overall financial health score according to InvestingPro analysis. The firm's analysis is based on insights from recent physician surveys, which suggest that while the insulin pump category is expected to continue gaining market share from multiple daily injections (MDI), Tandem is likely to face increased competition over the next two years.

The surveyed physicians anticipate Tandem Diabetes Care to experience a loss of approximately 100 basis points in market share by the end of 2025. Despite posting revenue growth of 25.7% in the last twelve months, this projected decline is attributed to a higher patient preference for patch-pump insulin delivery systems as opposed to Tandem's tubed-pump products.

Tandem Diabetes Care is also facing potential new challenges in market dynamics. Recent consumer pressures could lead to a shift in patients opting for Pharmacy Benefit (PBM) management rather than Durable Medical (TASE:BLWV) Equipment (DME) channels. These changes introduce competitive and pricing risks that may not have been fully accounted for in the current forecasts for the company.

Mizuho's price target of $20.00 reflects a valuation of approximately 1.5 times forward EV/Sales for Tandem Diabetes Care. This valuation represents a discount from the company's historical average of around 3.0 times, factoring in the expected market share shift and consumer-related risks. The coverage by Mizuho offers a comprehensive view of the challenges and market position of Tandem Diabetes Care as it navigates a competitive landscape in the medical device industry. With the next earnings report due on April 30, investors seeking deeper insights can access the full financial health analysis and detailed valuation metrics through InvestingPro's comprehensive research report.

In other recent news, Tandem Diabetes Care reported a 20.6% increase in fourth-quarter 2024 revenue, totaling $252.4 million, surpassing the consensus estimate of $249.7 million. Despite this, the company's guidance for 2025, projecting revenues between $997 million and $1.007 billion, has raised concerns among investors, leading to a downgrade from Citi analysts to Neutral with a reduced price target of $24. Similarly, Morgan Stanley (NYSE:MS) downgraded the stock to Equalweight, citing modest growth expectations and a new price target of $22. Bernstein also downgraded Tandem Diabetes to Market Perform, reducing the price target to $25 due to market share losses and increased competition.

In a separate development, Tandem announced positive results from a pivotal trial of its Control-IQ+ technology for type 2 diabetes, showing significant improvements in glycemic control. The study, published in The New England Journal of Medicine, demonstrated a 0.9% reduction in A1C levels among participants using the technology. Stifel, however, maintained a Buy rating on Tandem Diabetes with a $60 price target, noting the potential for the company's new Control-IQ+ algorithm to drive adoption. Despite the mixed analyst ratings, Tandem Diabetes continues to focus on expanding its market presence and enhancing its product offerings in the diabetes care technology sector.

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