DexCom and Insulet Stocks Show Promise Amidst Weight-Loss Drug Craze

The stock market has been experiencing a significant shift due to the popularity of weight-loss drugs such as Novo Nordisk’s Wegovy and Eli Lilly’s Mounjaro. These drugs have propelled Novo Nordisk and Eli Lilly to become the hottest stocks in the market, while diabetes and sleep-apnea remedies have taken a backseat. Analysts have even speculated on the potential impact of these drugs on various industries, such as airlines and restaurants.

However, Jefferies analyst Matt Taylor believes that the weight-loss drug craze may be overdone for now. He recently upgraded his rating on insulin pump maker Insulet from Hold to Buy, citing the stock’s 50% drop since May and its attractive valuation. Taylor also sees significant opportunities for Insulet’s pump rival Tandem Diabetes Care and glucose-monitor maker DexCom, reiterating his Buy ratings on both companies.

Taylor’s optimism stems from a doctor survey that indicates a continued rise in Type-2 diabetes cases and insulin usage in the coming years. He believes that Insulet’s growth potential will not be significantly affected by the use of weight-loss drugs like GLP-1. As a result, Taylor predicts that Insulet’s stock, currently trading around $164, could rise to $240 as pump sales continue to increase.

Medical-device analysts, including Taylor, are gaining confidence after the beating suffered by their sector this summer due to the rise of GLP-1 drugs. Morgan Stanley analyst Patrick Wood agrees that the drop in medtech stocks related to GLP-1 drugs may have been overdone. Wood’s modeling suggests that even if 30% of Type-2 diabetes patients adopt GLP-1 drugs by 2027, the decline in those requiring insulin would be minimal.

GLP-1 drugs work by suppressing hunger signals in the brain, and their impact on Wall Street has been evident. Analysts have speculated on the potential effects of these drugs on various industries, including restaurants and food packaging companies. However, Jefferies analysts did not change their views on their respective sectors after considering the implications of widespread weight loss.

While the weight-loss drug craze has caused fluctuations in the stock market, companies like Insulet and DexCom show promise amidst the changing landscape. Investors are keeping a close eye on these medical device companies as they continue to innovate and provide solutions for diabetes management.