Challenges Ahead for DexCom as Stock Struggles to Keep Up
With a market cap of $29.6 billion, DexCom, Inc. (DXCM) from San Diego, California, is a leader in continuous glucose monitoring (CGM) systems designed for diabetes management. Its notable products include the Dexcom G6 and G7, which provide users with real-time insights into their blood glucose levels.
Stock Performance Falls Short
Over the past 52 weeks, DexCom shares have significantly underperformed compared to broader market indices. Specifically, DXCM has seen a decline of 27.9%, while the S&P 500 Index ($SPX) has risen by 30.4%. In 2024, the stock experienced a nearly 39% drop, in stark contrast to the S&P’s overall gain of 23.1% year-to-date.
Moreover, the stock has lagged behind the Health Care Select Sector SPDR Fund’s (XLV) 10.4% rise in the same period and only managed a 3.8% increase year-to-date.
Market Reaction to Earnings Report
Recently, on October 24, DexCom reported a better-than-expected Q3 adjusted EPS of $0.45 and revenues hitting $994.2 million. However, this was met with a 1.9% drop in shares the following day due to worries over slowing sales growth, reflected in a modest 2% year-over-year revenue increase. The decrease in non-GAAP net income to $181 million from $204 million has raised red flags concerning potential profitability issues. Although product launches like Stelo and market expansions have occurred, these initiatives have yet to meet investor expectations for stronger growth amid stiff competition.
Future Earnings Outlook
For the fiscal year ending in December, analysts project that DXCM’s EPS will increase by 12.5% year-over-year to $1.71. Encouragingly, the company has surpassed consensus earnings estimates in the last four quarters, suggesting a promising trend.
A total of 22 analysts currently covering the stock show a consensus rating of “Strong Buy.” This rating encompasses 16 “Strong Buy” endorsements, one “Moderate Buy,” and five “Holds.”
Analyst Insights
On November 15, Larry Biegelsen from Wells Fargo reaffirmed a “Buy” rating for DexCom, setting a price target of $90.
Currently, DXCM is trading below the average price target of $96.18, with the highest target set at $120, indicating a potential upside of 57% from present price levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
