Should You Continue to Retain PODD Stock in Your Portfolio Now?

Insulet Corp.'s PODD recent FDA approval of Omnipod 5 for type 2 diabetes patients is set to expand the product's market potential. The planned launch of Omnipod 5 with Abbott's Freestyle Libre 2 Plus sensor is likely to drive further growth in the U.S. markets. Robust financial strength also bodes well for the stock. However, the rising economic uncertainty and competitive pressures remain concerns for the company.

In the past year, this Zacks Rank #3 (Hold) stock has rallied 7.6% compared with the 15.5% growth of the industry and the 24.9% rise of the S&P 500 composite.

The developer, manufacturer and distributor of insulin delivery systems has a market capitalization of $14.22 billion. PODD's earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 67.5%.

Catalysts for PODD Stock

Omnipod 5, a New Focus: Insulet's game-changing Omnipod 5 stands out as the only FDA-cleared, fully disposable pod-based AID system. The product attributes, such as on-body wearable, simplicity, ease of use and broad accessibility, are the key drivers of its rapid adoption and are successfully driving market growth. The second quarter saw nearly 85% of the new starts coming from people previously using MDI, Insulet's target market, while competitive conversions also remained very strong. The company is driving growth rates above 20% in international revenues, underscoring the strong potential for Omnipod 5's continued expansion. On a promising note, Omnipod 5 recently received the FDA's usage clearance by people with type 2 diabetes (aged 18 years and above) in the United States.

Expanding Access and Awareness of Omnipod: One of Insulet's key strategic imperatives is to increase the availability and visibility of Omnipod products. In the second quarter of 2024, Omnipod 5 integrated with Dexcom's G6 CGM drove 27% growth in U.S. Omnipod revenues. The company began the full market release of Omnipod 5 with G7, available exclusively through several specialty pharmacies.

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On the latest earnings call, Insulet hinted at launching Omnipod 5 with Abbott's Freestyle Libre 2 Plus sensor in the United States by the end of this year. The combination had a limited market release in the United Kingdom and the Netherlands during the first quarter. Further, Omnipod DASH is driving strong new customer starts in the U.S. type 2 diabetes market.

Strong Solvency but Leveraged Balance Sheet: Insulet exited the second quarter of 2024 with cash and cash equivalents of $821 million and current debt of $38 million. This robust financial stability appears highly promising during the prolonged period of macroeconomic issues.  Long-term debt of $1.36 billion remained marginally in line with the 2024 first-quarter figure.

Factors Weighing on Insulet Stock

Economic Uncertainty Hampers Growth: The continuing worldwide macroeconomic and geopolitical uncertainty may reduce the demand for Insulet's products, intensify competition, exert pressure on prices, dent supply and lengthen the sales cycle. The company continues to experience challenges stemming from the global supply chain disruption. Its reliance on third-party suppliers in China could face potential risks from political or financial instability and labor unrest, among others.

Tough Competitive Pressure: Insulet operates in a highly competitive environment dominated by firms ranging from large multinational corporations with significant resources to start-ups. It also competes with companies offering products and supplies for MDI therapy, which is the most prevalent method of insulin delivery. Regulatory conditions limit the company's ability to switch to strategies like price increases and other drivers of cost increases. With competitors potentially developing effective patch pumps or breakthrough diabetes treatments that do not require the delivery of insulin, sales of Omnipod may be negatively affected.

PODD Estimate Trend

The Zacks Consensus Estimate for Insulet's 2024 earnings per share has decreased 1.6% to $3.04 in the past 30 days.

The Zacks Consensus Estimate for the company's 2024 revenues is pegged at $2.01 billion. This suggests an 18.3% rise from the year-ago reported number.

Top MedTech Stocks

Some better-ranked stocks in the broader medical space are TransMedix Group TMDX, Veracyte VCYT and Boston Scientific BSX. While TransMedix Group and Veracyte currently sport a Zacks Rank #1 (Strong Buy), Boston Scientific carries a Zacks Rank #2 (Buy).

TransMedix Group's earnings are expected to surge 255.8% in 2024. Its shares have soared 130.6% compared with the industry's 11% rise in the past year.

TMDX's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 287.5%.

Veracyte has an estimated earnings growth rate of 112.8% compared with the industry's 12.4%. Shares of the company have soared 13.4% compared with the industry's 10.9% rise over the past year.

VCYT's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 328.4%.

Boston Scientific has an estimated earnings growth rate of 17.1% compared with the industry's 14.9%. Shares of the company have rallied 51.3% compared with the industry's 15.5% rise over the past year.

BSX's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.

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