Medical device maker Tandem Diabetes Care Inc TNDM has high growth potential, but its upside could be limited by valuation, according to Bank of America Merrill Lynch.
The Analyst
Analyst Travis Steed upgraded Tandem Diabetes from Underperform to Neutral and hiked the price target from $2 to $45.
The Thesis
Tandem Diabetes' balance sheet is no longer a major concern, and there are "multiple levers to drive 20-30-percent growth for several years," Steed said in a Friday note. (See the analyst's track record here.)
The company has a superior product in its insulin pump, with renewals contributing to upside, the analyst said.
Steed sees an incremental opportunity in the company's expansion into international markets.
When the company's Control-IQ products become commercially available in 2019, the analyst said Tandem may even have an opportunity to disrupt Medtronic PLC MDT's exclusive deal with UnitedHealth Group Inc UNH.
Yet BofA noted that the shares are already trading at 11 times its 2019 revenue estimate, keeping the firm on the sidelines.
BofA forecast 2018 sales of $146 million and 42-percent year-over-year growth, with the potential for $15 million in upside.
The Price Action
Tandem Diabetes shares have appreciated over 1,500 percent year-to-date.
The stock was losing 1.53 percent to $38.02 at the time of publication late in Friday's session.
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Photo courtesy of Tandem Diabetes Care.
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