Analyst Travis Steed of Bank of America Securities reiterated a Buy rating on Insulet (PODD – Research Report), retaining the price target of $335.00.
Travis Steed has given his Buy rating due to a combination of factors surrounding Insulet’s recent financial maneuvers. The company has initiated a new $450 million debt issuance at a 6.5% interest rate to replace its existing $800 million convertible debt due in 2026. This strategic move is part of Insulet’s efforts to transition away from convertible debt, thereby strengthening its capital structure as it matures. Although this new debt is expected to be slightly dilutive to earnings per share (EPS) by approximately 5%, Steed anticipates material margin improvements and EPS growth over the coming years.
Despite the initial EPS headwind from the new debt, the retirement of the convertible debt will result in a reduction of the share count by about 3.5 million diluted shares, which is roughly 5% of the outstanding shares. This reduction is expected to offset some of the EPS dilution. Steed maintains a positive outlook on Insulet’s ability to execute on margin expansion, with expectations of a new long-term margin guide to be announced, likely in June. This potential for margin and EPS upside supports the reiterated Buy rating, with a price objective set at $335.00 USD, significantly higher than the current price of $265.82 USD.
In another report released on March 5, RBC Capital also initiated coverage with a Buy rating on the stock with a $340.00 price target.