Shares of Insulet Corporation PODD reached a new 52-week high of $242.13 on Sep 30, before closing the session marginally lower at $236.59. The stock has rallied 7.3% since its second-quarter 2020 earnings announcement on Aug 6.
The company is witnessing an upward trend in its stock price, prompted by strength in the Omnipod system, both in the United States and international markets. Insulet’s pandemic-led initiatives and a booming diabetes market bode well. Further, the company’s solid performance in the second quarter of 2020 despite the pandemic-led business disruptions boosted market sentiments. However, a stiff competitive landscape and sole reliance on the Omnipod system are concerning.
Let’s delve deeper.
Insulet exited second-quarter 2020 with better-than-expected results. The company registered strong year-over-year improvement in revenues in the second quarter on solid uptake of the Omnipod system, both in the United States and international markets. The momentum of Omnipod DASH is encouraging based on the solid uptake in geographies in which it has been launched. The company’s plans of geographical expansion buoy optimism. Insulet maintains its $1-billion revenue goal for 2021.
Other Growth Drivers
Pandemic-Led Initiatives: Insulet’s efforts to minimize supply disruptions during the pandemic are noteworthy. The sales calls are being conducted through Webex. The manufacturing and supply teams are ensuring that the growing customer demand is met with minimum disruptions. It has also broadened its financial assistance program to ensure that customers who rely on Omnipod will be able to continue using it even if they lose insurance coverage. According to Insulet, it does not expect the coronavirus impact to last on the company’s business for more than a couple of quarters.
Build Out of U.S. Manufacturing Facility: Management seems to be particularly upbeat about the manufacturing unit in Acton, MA. Insulet started production in its new highly-automated manufacturing facility in Acton in the first half of 2019. Insulet expects that following start up-related activities, the new facility will allow it to lower manufacturing costs, increase supply redundancy, add capacity closer to its North American customer base and support growth. Management expects to continue expanding investment in the facility in 2020 to drive its business.
Diabetes Market Boom: A rising elderly population, unhealthy lifestyle, rising awareness and higher expenditure on healthcare are likely to continue driving the highly-competitive diabetes market. Also, Insulet projects that around one-third of the Type 1 diabetes population in the United States uses insulin pump therapy. It also believes that less than 10% of the Type 2 diabetes population in the United States, who are also insulin-dependent, uses insulin pump therapy.
Competitive Landscape: Insulet operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the markets where the company operates limit Insulet’s ability to switch to strategies like price increases or adopt other strategies which might lead to cost increases.
The company’s Omnipod System primarily competes with Medtronic plc’s MDT market-leading MiniMed, a division of Medtronic. Notably, MiniMed boasts a major part of the conventional insulin pump market share in the United States. Other suppliers in the United States include Tandem Diabetes Care, Inc. TNDM.
Sole Reliance on Omnipod System: Insulet’s financial results continue to largely depend on the performance of its lead product — Omnipod system. Per the company, any adverse changes in the market acceptance of the product or worsening of the factors that negatively influence sales will dent the company’s financials majorly.
Zacks Rank & Key Pick
Currently, Insulet carries a Zacks Rank #3 (Hold).
A better-ranked stock from the broader medical space is QIAGEN N.V. QGEN.
QIAGEN’s long-term earnings growth rate is estimated at 22.3%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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