TNDM: Revenue Momentum And Renewal Cycle Will Fuel Continued Upside Potential

Key Takeaways

• Expanding pharmacy channels, international sales, and innovative products are driving higher-margin recurring revenues, topline growth, and improved earnings.
  
• Increased market penetration through MDI conversions, type two diabetes adoption, and technology integration is expanding the addressable market and reinforcing ecosystem lock-in.
  
• Rising competitive pressures, operational challenges, and evolving market preferences threaten growth, margins, and differentiation despite efforts in innovation and commercial transformation.

Catalysts

Designs, develops, and commercializes technology solutions for people living with diabetes in the United States and internationally.

• Broader pharmacy channel expansion and acceleration of pharmacy-based supply sales are expected to lower out-of-pocket costs, increase pump adoption rates, and shift more high-margin recurring supply sales through premium-priced channels-supporting future revenue growth, margin expansion, and improved earnings.
  
• Ongoing international expansion, including direct sales rollouts in Europe and other markets, is removing distributor price concessions and unlocking better pricing power, while simultaneously driving topline growth from new patient starts and maturing renewal revenue-positively impacting revenue and gross margin profiles.
  
• Significant runway remains in converting patients from multiple daily injections (MDI) and new adoption by people with type 2 diabetes, with early pilot success and anticipated CMS/insurance policy changes expected to unlock a much larger addressable market, driving long-term revenue growth.
  
• Advancements in product pipeline-including the upcoming launches of Steadiset extended wear infusion sets and Tubeless Mobi-reinforce innovation leadership and enable participation in the sustained shift toward automated, user-friendly pump solutions, which will support both topline growth and gross margin expansion.
  
• Enhanced connectivity and interoperability, demonstrated by t:slim's integration with the widely-used Libre 3 CGM, are poised to attract non-pump CGM users and reinforce ecosystem lock-in, expanding the user base and boosting high-margin recurring supply revenues.

Tandem Diabetes Care Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tandem Diabetes Care's revenue will grow by 7.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from -20.5% today to 1.2% in 3 years time.
• Analysts expect earnings to reach $14.4 million (and earnings per share of $0.2) by about September 2028, up from $-205.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $36.3 million in earnings, and the most bearish expecting $-56.2 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 147.1x on those 2028 earnings, up from -4.1x today. This future PE is greater than the current PE for the US Medical Equipment industry at 28.6x.
• Analysts expect the number of shares outstanding to grow by 2.88% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.64%, as per the Simply Wall St company report.

Tandem Diabetes Care Future Earnings Per Share Growth

Risks

• Increasing competition in the U.S. market-including the recent entry of a large new competitor with a significant sales force and evolving strategies by existing competitors-may slow new pump starts and contribute to flat or declining growth in the near term, putting pressure on revenue and earnings growth.
  
• Transformation and expansion of the commercial organization through multichannel initiatives and new systems are not yet fully implemented, delaying anticipated benefits and creating execution risk, which could limit future operating leverage and net margin improvement.
  
• Heavy reliance on renewals, which are now projected to be flat year-over-year in 2026 for the first time, means that recurring revenue growth may slow unless new patient adoption offsets this trend, posing a risk to sustaining double-digit top-line growth.
  
• Expansion into the pharmacy channel and international direct sales brings operational complexity and inventory timing risks, and although these are intended to drive margins, they also increase the company's exposure to changing reimbursement structures and regulatory uncertainties, potentially impacting margin expansion and earnings stability.
  
• The insulin pump market is rapidly evolving with preferences shifting towards hybrid closed-loop and tubeless/non-invasive solutions; while Tandem's innovation pipeline is robust, there is a risk that technological disruption, shifts in standard of care, or commoditization by non-traditional entrants could erode the company's differentiation and compress long-term revenue growth and gross margins.

Valuation

• The analysts have a consensus price target of $22.619 for Tandem Diabetes Care based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $51.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $14.4 million, and it would be trading on a PE ratio of 147.1x, assuming you use a discount rate of 8.6%.
• Given the current share price of $12.35, the analyst price target of $22.62 is 45.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.