8. DexCom, Inc. (NASDAQ:DXCM)
Number of Hedge Fund Holders: 64
Year-to-Date Share Price Performance: -39.19%
DexCom, Inc. (NASDAQ:DXCM) is a medical device company specializing in continuous glucose monitoring (CGM) systems for diabetes management, both in the U.S. and internationally. Its main products include the Dexcom G6 and G7 CGM systems, the Dexcom Share remote monitoring system, and the Dexcom Real-Time API for integrating CGM data into health apps. The company also offers Dexcom ONE, which replaces traditional finger-stick blood glucose testing.
DexCom (NASDAQ:DXCM) faced a major sell-off after it reported Q2 earnings in July as its stock price dropped over 40% between July 25 and 26. In its second-quarter 2024 investor letter, Ithaka Group said that while the company reported a strong quarter that exceeded analyst expectations, the company’s stock price declined likely due to failing to meet high investor expectations after several quarters of significant growth.
Moreover, its earnings report revealed a decline in both customer numbers and revenue per customer. CEO Kevin Sayer explained that the downturn was partly due to a restructuring of the U.S. sales force following the launch of the over-the-counter Stelo device. He also noted an unexpected surge in rebate eligibility for the G7 continuous glucose monitor, which occurred at a rate three times faster than anticipated.
DexCom (NASDAQ:DXCM) reported its Q3 earnings on October 24. It posted an EPS of $0.45, exceeding expectations by $0.02, and its revenue of $994 million showed a slight increase from the previous year and outperformed the estimates by $3.01 million.
Its U.S. revenue saw a 2% decline due to shifting channel dynamics. International markets performed well, especially in Japan and Europe. The company maintained its 2024 revenue guidance of $4 billion to $4.05 billion, with continued focus on improving sales productivity and navigating market challenges.
After the earnings, Canaccord Genuity analyst William Plovanic reiterated a Buy rating on DexCom (NASDAQ:DXCM) stock with a price target of $89. He mentioned strong international sales that outperformed expectations and contributed to overall revenue growth, despite a decline in U.S. revenue. The record new patient starts in Q3 suggest a promising future for recurring revenue. Plovanic views the challenges related to G7 rebates and distribution changes as temporary and manageable, with expected benefits from new patient starts in the near future.
Artisan Partners stated the following regarding DexCom, Inc. (NASDAQ:DXCM) in its Q3 2024 investor letter:
“Among our top detractors were DexCom, Inc. (NASDAQ:DXCM), iRhythm and Celsius. Dexcom is the leader in continuous glucose-monitoring (CGM) systems. With data increasingly supporting the clinical and economic case for CGMs, we believe Dexcom is well positioned to further penetrate the Type 1 diabetes market and to drive adoption in the much larger Type 2 diabetes market. Unfortunately, financial results showed meaningful growth deceleration, and shares responded accordingly. The company pointed to several causes for the surprising slowdown, most of which were execution related (e.g., sales force changes and distribution channel mismanagement) in the context of healthy industry trends. While we continue to believe in the case for CGMs and Dexcom’s technology, the lack of execution is concerning. We believe these operational mistakes will take time to fix, and we reduced our position.”
