2. DexCom, Inc. (NASDAQ:DXCM)
Analysts’ Upside Potential: 51.58%
The goal of the medical device firm DexCom, Inc. (NASDAQ:DXCM) is to design, develop, and market continuous glucose monitoring (CGM) devices both domestically and abroad. The company sells its systems to healthcare professionals and individuals with diabetes.
The US Food and Drug Administration approved Dexcom’s latest over-the-counter CGM, Stelo, for use in March, the company reported. Patients with Type 2 diabetes who do not take insulin are intended to use Stelo.
On July 26, Dexcom, Inc. (NASDAQ:DXCM) saw its worst-ever decline as its shares fell more than 40% to finish at $64, wiping out more than $17 billion in market capitalization. The sharp drop followed the company’s release of less optimistic second-quarter earnings and expectations for the balance of the year. This was the worst one-day decline since September 2017, when the stock dropped 33% in a single day.
The diabetes treatment company, well-known for its continuous glucose monitors (CGMs), witnessed a 15% YoY increase in revenue in Q2 2024 to $1 billion. However, the total revenue was less than analysts’ projections of $1.04 billion. The main source of worry for investors was Dexcom’s updated revenue projection, which was previously expected to be between $4.20 billion and $4.35 billion. Instead, the company now projects revenue for the third quarter of $975 million to $1 billion and $4 billion to $4.05 billion for the entire year.
CEO Kevin Sayer blamed the losses on a poor reorganization of the sales force, fewer new clients than projected, and a decline in revenue per user. The company also encountered difficulties with the G7 CGM’s rebate structure and its durable medical equipment (DME) channel.
JPMorgan reduced its rating on Dexcom’s shares from buy to hold, noting the company’s “sharp turn in the wrong direction” and raising doubts about whether internal problems were more likely to be the cause than outside variables like the growing popularity of GLP-1 weight loss medications. Despite the turbulence, analysts at Leerink and William Blair are optimistic about the company’s long-term prospects since they think the present problems are temporary and won’t likely affect its trajectory for its future growth.
Baron Health Care Fund stated the following regarding DexCom, Inc. (NASDAQ:DXCM) in its Q2 2024 investor letter:
“DexCom, Inc. (NASDAQ:DXCM) sells a continuous glucose monitoring device to help diabetics monitor their blood glucose levels. Investors reacted negatively to DexCom’s first quarter earnings report, which missed revenue estimates. In addition, year-over-year comparisons will be even tougher to beat in the yet-to-be-reported second quarter, and some investors appeared to interpret management commentary as trying to manage expectations due to the tougher comparisons and potential disruption from an increase in the sales force and reconfiguration of sales territories. We think these concerns are shortsighted and believe DexCom has a long runway for growth driven by increased adoption of its continuous glucose monitoring sensors. We are also optimistic about the launch of Stelo, an over-the-counter glucose sensor for Type 2 diabetics who are not on insulin.”
It is one of the best diabetes stocks to buy now since 17 analysts have given an average price target of $107.65 and an upside potential of 51.58% from the current stock price of $71.02. Analysts have rated DXCM as a “buy.”
