DexCom favored as Wolfe launches coverage on diabetes device makers
Initiating coverage on medical equipment makers for diabetes, Wolfe Research granted an Outperform rating for CGM device maker DexCom (NASDAQ:DXCM), and Peer Perform ratings for insulin pump makers Tandem Diabetes (NASDAQ:TNDM) and Insulet Corporation (NASDAQ:PODD).
"Generally, vs. CGM, pump market doesn't have as dreamy a long-term dream," analyst Mike Polark wrote, highlighting the prospects of continuous glucose monitoring (CGM) devices compared to wearable insulin pumps.
With a $121 year-end target for DexCom (DXCM), the analyst points to the ongoing overseas launch of the company's G7 device and its upcoming U.S. launch in H1 2023.
Polark also expects the company to benefit from Medicare basal coverage decision from H2 2023 and highlights the momentum for DexCom One in "price-sensitive" overseas markets.
The analyst warns that DexCom (DXCM) will continue to see a decline in revenue per user with "most significant step downs likely in rear view."
Meanwhile, on Tandem (TNDM) Polark wrote: "We envision a day when TNDM gets its mojo back but for now we'd prefer to watch from a safe distance." The analyst cites the potential impact of Medtronic's (MDT) 780G device launch if the company resolves its FDA warning letter.
Noting that the company's Omnipod 5 launch could be a "material volume catalyst" in 2023 and beyond, Wolfe points to Insulet's (PODD) LTM outperformance to lament that the firm "couldn't muster enthusiasm to embrace stock" trading at ~90x of 2023 EBITDA.
Seeking Alpha contributor, Gary Bourgeault argues that Insulet's (PODD) Omnipod 5 device "is exceeding revenue estimates, but also increasing company expenses at the same time."