Insulin-pump maker Insulet is the IBD Stock Of The Day as PODD stock hovers in a buy zone.
Insulet shares broke out in early November and quickly surged above the 5% chase zone after the company crushed September-quarter expectations. The company also raised its guidance for full-year revenue, with burgeoning growth for its Omnipod insulin delivery system in the U.S.
Shares have a rich valuation, Bank of America Securities analyst Travis Steed said in a recent report to clients.
"This is in line with high-growth diabetes companies, which we think is reasonable given Insulet's high-growth recurring revenue business model and competitive positioning with a recent new product approval," he said.
Amid a broad rally on today's stock market, PODD stock jumped 3.8% to close at 299.37.
PODD Stock: Rivaling Other Insulin Pump Makers
Founded in 2000, Insulet makes Omnipod, a body-worn insulin pump. These pumps — which include devices from rivals Tandem Diabetes and Medtronic — can be paired with body-worn continuous glucose monitors.
Insulin pumps respond when blood sugar levels fall out of a patient's desired range. When insulin falls too low, patients can experience a variety of symptoms, like blurred vision and drowsiness. High insulin levels can lead to weight gain, hunger and fatigue.
Insulet's Omnipod 5 is now cleared in the U.S. and Europe for children as young as age 2 with type 1 diabetes — a boon for PODD stock. This is a genetic condition in which the body doesn't make enough, or any, of its own insulin. Insulet, and others in the diabetes devices space, are also focusing on the type 2 diabetes space. This is a progressive condition in which patients eventually need supplemental insulin.
Test results in young children have been promising so far, says BTIG analyst Marie Thibault. After three months, 90% of children who wore Omnipod had "very good" or "fairly good" sleep, up from 65% at the beginning of the study. Further, there were no severe side effects, she said.
"We think the totality of this evidence demonstrates that Omnipod 5 is both a valuable and reliable solution for people with type 1 diabetes across all ages and their caregivers," she said in her note to clients. She has a buy rating and 285 price target on PODD stock.
Potential For Upside In Type 2 Market
In the current quarter, analysts expect $332 million in sales for Insulet. Sales would rise roughly 8%. Though adjusted earnings of 17 cents per share would decline about 60% from the year-earlier period.
Bank of America's Steed notes Insulet could enjoy greater sales if penetration into the type 2 market goes smoothly. He noted the Omnipod is also now available through pharmacies, easing the path for patients to access the device. He has a price target of 300 on PODD stock.
Insulet shares are now trading in the 5% chase zone above a buy point at 283.38 out of a double-bottom base, according to MarketSmith.com. The buy zone runs from 238.38 to 250.30. Investors could also look for PODD stock to move the Nov. 25 high of 295.95 for another entry.
Bullishly, PODD stock has a Relative Strength Rating of 91 out of a best-possible 99. This puts shares in the leading 9% of all stocks in terms of 12-month performance, according to IBD Digital.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
