Medtronic's (MDT) planned separation of its diabetes business may create shareholder value in the long term, Needham said Friday in a note.

The separation probably won't "immediately unlock significant value," though "we think that the two companies are likely to see better results as separate entities" in the longer term, Needham said.

Medtronic's margins will increase with the separation and Symplicity, Affera and Hugo will have a bigger impact on the company's growth rate, the report said.

The diabetes segment will be able to decide whether to reinvest free cash flow back into its own business "and should become more nimble and responsive to customer needs and market trends," the report said.

The proposed split is expected to be completed in 18 months, the report said.

Needham has a hold rating on Medtronic stock.

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