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Reasons to Retain DexCom Stock in Your Portfolio for Now
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DexCom, Inc. (DXCM - Free Report) is well-poised for growth in the coming quarters, backed by its strong product portfolio. A robust second-quarter 2024 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, risks related to stiff competition persist.
This Zacks Rank #3 (Hold) company’s shares have lost 46.8% year to date against the industry’s 9.9% growth. The S&P 500 Index has increased 21.1% in the same time frame.
DXCM, a renowned medical device company and provider of continuous glucose monitoring (CGM) systems, has a market capitalization of $26.86 billion. It projects 19.1% growth over the next five years and expects to maintain a strong performance going forward.
DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 23.03%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Upsides
Strong Product Demand: We are upbeat about DexCom's continued strength in its CGM products.
The company continues to expand its product portfolio with the addition of new products like G7 in 2023 and One+ in February 2024. These have helped accelerate its growth. Sales of G7 reflect strong demand since its launch late last year.
Moreover, the expansion of coverage for CGM systems during the second quarter supported growth. This trend is likely to continue for the rest of 2024. The availability of new sensors like G6 and G7 in new international markets is also boosting revenue growth. DXCM launched its latest sensor, G7, in more than 15 countries in 2023. Moreover, the company is focusing on connecting its CGM sensors with automated insulin delivery systems worldwide. This may boost the sensors’ demand going forward.
Additionally, the glucose monitoring market presents significant commercial opportunities for the company. DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it with a competitive edge in the MedTech space.
New Product Launch: In August, DexCom announced the availability of Stelo, the first over-the-counter CGM biosensor in the United States for people with type II diabetes who do not use insulin. The expansion in the underpenetrated Type 2 diabetes market should support DXCM’s top-line growth going forward.
In June, DexCom announced the integration of its G6 CGM system with Insulet’s Omnipod 5 Automated Insulin Delivery System for Type 1 diabetes patients. The same month, the company announced the direct connectivity of the G7 CGM system with the Apple Watch. This added feature is now available to users in the United States, the UK and Ireland, with additional markets launching the feature soon.
In February, DexCom launched its latest CGM system, Dexcom ONE+, which is simple to use and lowers the entry hurdle to diabetic technology. It aims to deliver a highly effective CGM experience to people treating type 1 or type 2 diabetes with insulin.
Positive Coverages: DXCM’s G6 and G7 sensors have received extensive coverage in the United States during the past few quarters, raising our optimism. The Centers for Medicare & Medicaid Services’ decision to expand coverage for all people using insulin and certain non-insulin-using individuals who struggle with hypoglycemia in 2023 paved the way for greater commercial coverage for these populations. This decision strengthened the company’s position with the most covered CGM devices in the United States.
DXCM’s G7 CGM System is already covered by all major pharmacy benefit managers in the country. The DexCom One+ is also available in Europe under a reimbursement policy. During the second quarter, the company’s G7 CGM system was added to the public prescription drug insurance plan for Québec residents living with type 1 diabetes.
Strong Q2 Results: DXCM’s strong second-quarter revenues buoy optimism. The company’s earnings per share improved 26.5% year over year to 43 cents, while revenues increased 15% to $1 billion. Dexcom expects total revenues to be in the band of $4-$4.05 billion for 2024, implying organic growth of 17-21% year over year.
Impressive contributions from the Sensor segment, and domestic and international revenue growth are likely to be the key catalysts. Additionally, the glucose monitoring market presents significant commercial opportunities for DXCM.
Downsides
Rising Costs: The company’s cost of sales rose 16.2% year over year to $377.6 million during the second quarter. Operating expenses increased 12% from the prior-year quarter’s level.
Stiff Competition:The market for blood glucose monitoring devices is highly competitive, subject to rapid changes and new product introductions. DXCM’s competitors manufacture and market products for the single-point finger stick device market and collectively account for the worldwide sales of self-monitored glucose testing systems at present.
Estimate Trend
DexCom is witnessing a flat estimate revision trend for 2024. In the past 30 days, the Zacks Consensus Estimate for earnings per share has been stable at $1.69 for 2024.
The consensus mark for the company’s third-quarter revenues is pegged at $988.9 million, indicating a 1.4% improvement from the year-ago quarter’s reported number. The consensus estimate for earnings is pinned at 44 cents per share, implying a decline of 12% year over year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 29.4%. Its shares have risen 55.3% compared with the industry’s 20.6% growth year to date.
Masimo, sporting a Zacks Rank of 1 at present, has an estimated growth rate of 24.24% for 2025. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 14.63%.
Masimo’s shares have risen 14.7% year to date compared with the industry’s 9.9% growth.
Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an estimated earnings growth rate of 12.6% for 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.18%.
BSX’s shares have risen 45.6% year to date compared with the industry’s 14% growth.
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Reasons to Retain DexCom Stock in Your Portfolio for Now
DexCom, Inc. (DXCM - Free Report) is well-poised for growth in the coming quarters, backed by its strong product portfolio. A robust second-quarter 2024 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, risks related to stiff competition persist.
This Zacks Rank #3 (Hold) company’s shares have lost 46.8% year to date against the industry’s 9.9% growth. The S&P 500 Index has increased 21.1% in the same time frame.
DXCM, a renowned medical device company and provider of continuous glucose monitoring (CGM) systems, has a market capitalization of $26.86 billion. It projects 19.1% growth over the next five years and expects to maintain a strong performance going forward.
DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 23.03%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Upsides
Strong Product Demand: We are upbeat about DexCom's continued strength in its CGM products.
The company continues to expand its product portfolio with the addition of new products like G7 in 2023 and One+ in February 2024. These have helped accelerate its growth. Sales of G7 reflect strong demand since its launch late last year.
Moreover, the expansion of coverage for CGM systems during the second quarter supported growth. This trend is likely to continue for the rest of 2024. The availability of new sensors like G6 and G7 in new international markets is also boosting revenue growth. DXCM launched its latest sensor, G7, in more than 15 countries in 2023. Moreover, the company is focusing on connecting its CGM sensors with automated insulin delivery systems worldwide. This may boost the sensors’ demand going forward.
Additionally, the glucose monitoring market presents significant commercial opportunities for the company. DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it with a competitive edge in the MedTech space.
New Product Launch: In August, DexCom announced the availability of Stelo, the first over-the-counter CGM biosensor in the United States for people with type II diabetes who do not use insulin. The expansion in the underpenetrated Type 2 diabetes market should support DXCM’s top-line growth going forward.
In June, DexCom announced the integration of its G6 CGM system with Insulet’s Omnipod 5 Automated Insulin Delivery System for Type 1 diabetes patients. The same month, the company announced the direct connectivity of the G7 CGM system with the Apple Watch. This added feature is now available to users in the United States, the UK and Ireland, with additional markets launching the feature soon.
In February, DexCom launched its latest CGM system, Dexcom ONE+, which is simple to use and lowers the entry hurdle to diabetic technology. It aims to deliver a highly effective CGM experience to people treating type 1 or type 2 diabetes with insulin.
Positive Coverages: DXCM’s G6 and G7 sensors have received extensive coverage in the United States during the past few quarters, raising our optimism. The Centers for Medicare & Medicaid Services’ decision to expand coverage for all people using insulin and certain non-insulin-using individuals who struggle with hypoglycemia in 2023 paved the way for greater commercial coverage for these populations. This decision strengthened the company’s position with the most covered CGM devices in the United States.
DXCM’s G7 CGM System is already covered by all major pharmacy benefit managers in the country. The DexCom One+ is also available in Europe under a reimbursement policy. During the second quarter, the company’s G7 CGM system was added to the public prescription drug insurance plan for Québec residents living with type 1 diabetes.
Strong Q2 Results: DXCM’s strong second-quarter revenues buoy optimism. The company’s earnings per share improved 26.5% year over year to 43 cents, while revenues increased 15% to $1 billion. Dexcom expects total revenues to be in the band of $4-$4.05 billion for 2024, implying organic growth of 17-21% year over year.
Impressive contributions from the Sensor segment, and domestic and international revenue growth are likely to be the key catalysts. Additionally, the glucose monitoring market presents significant commercial opportunities for DXCM.
Downsides
Rising Costs: The company’s cost of sales rose 16.2% year over year to $377.6 million during the second quarter. Operating expenses increased 12% from the prior-year quarter’s level.
Stiff Competition:The market for blood glucose monitoring devices is highly competitive, subject to rapid changes and new product introductions. DXCM’s competitors manufacture and market products for the single-point finger stick device market and collectively account for the worldwide sales of self-monitored glucose testing systems at present.
Estimate Trend
DexCom is witnessing a flat estimate revision trend for 2024. In the past 30 days, the Zacks Consensus Estimate for earnings per share has been stable at $1.69 for 2024.
The consensus mark for the company’s third-quarter revenues is pegged at $988.9 million, indicating a 1.4% improvement from the year-ago quarter’s reported number. The consensus estimate for earnings is pinned at 44 cents per share, implying a decline of 12% year over year.
DexCom, Inc. Price
DexCom, Inc. price | DexCom, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Masimo (MASI - Free Report) and Boston Scientific (BSX - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 17.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 29.4%. Its shares have risen 55.3% compared with the industry’s 20.6% growth year to date.
Masimo, sporting a Zacks Rank of 1 at present, has an estimated growth rate of 24.24% for 2025. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 14.63%.
Masimo’s shares have risen 14.7% year to date compared with the industry’s 9.9% growth.
Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an estimated earnings growth rate of 12.6% for 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.18%.
BSX’s shares have risen 45.6% year to date compared with the industry’s 14% growth.