We recently compiled a list of the 10 Worst Performing NASDAQ Stocks in 2024. In this article, we are going to take a look at where DexCom, Inc. (NASDAQ:DXCM) stands against the other Worst Performing NASDAQ Stock in 2024.
Factors Driving Market Growth
Markets have been soaring for the better part of the year, with pullbacks acting as entry levels from where investors have joined and pushed the market higher. While artificial intelligence was one of the factors that drove many tech stocks higher, earnings results that were better than expected also had a significant impact.
Similarly, a resilient US economy that has stayed clear of recession amid high interest rates and inflation has also supported the upward momentum. With the NASDAQ and other major indices at all-time highs, investors are becoming increasingly concerned whether the strong upward momentum is sustainable.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
Challenges and Investor Concerns
Valuations appearing overstretched after one of the longest bull runs are one factor that is sending jitters among the investment community. Similarly, concerns over the negative impact of high interest rates and uncertainty over the US election are slowly curtailing the upward momentum.
Bryn Talkington, managing partner of Requisite Capital Management, believes markets will remain choppy heading into year-end owing to the uncertainty around the US election.
“Until the election is over and we can confirm gridlock, I think at the headline number we’re not going to do much, but I think underneath the surface we’re going to see the haves and have nots,” she said.
Nevertheless, it is the impact of the soaring geopolitical tensions in the Middle East that threatens to affect supply lines that are keeping the markets on edge. The prospects of energy prices surging and fueling inflation on Israel attacking Iran is also taking a significant toll on investor’s sentiments on equities.
While interest rate cuts were expected to be the catalyst to push the equity markets to record highs, that was not the case, as everything seemed to have already been priced. Paul Christopher, head of investment strategy at Wells Fargo Investment, believes the US Federal Reserve is unlikely to cut aggressively as the better-than-expected jobs report in September and renewed worries of a spike in inflation act as a deterrent.
“Just really not ready to cut quite as aggressively as the markets had previously priced. I think if you take November from a half a point down to a quarter point hike, that’s not really a big deal, but it does require some adjustment in markets. There may be some adjustments to rate expectations for December and January as well,” he told CNBC’s “Squawk Box Asia” earlier this month.
While the US economy does not show enough deterioration to justify aggressive cuts, there are stocks listed on the NASDAQ that have underperformed, attributed to a number of factors. Top on the list are companies whose core businesses are negatively impacted by high interest rates that tend to affect consumer purchasing power.
Likewise, some of the worst-performing stocks in the NASDAQ have also taken a hit on high inflation. While inflation has started showing signs of edging lower even as the Fed continues to cut rates, some of the worst-performing stocks are showing signs of bottoming out as macroeconomics improves.
The October BofA Global Fund Manager survey indicates that investors are more optimistic than they have been in four years. 74% of investors think the United States will avoid a recession, demonstrating their optimism about the economy.
Likewise, Michael Hartnett, an investment strategist at BofA, said that investor sentiment is rising due to expectations of further rate cuts by the U.S. Federal Reserve and hopes that Beijing will release more stimulus to strengthen its economy.
Source: pexels
Our Methodology
We utilized a stock screener to find NASDAQ-listed stocks with market caps exceeding $2 billion as of October 16. We then sorted the stocks in descending order based on their year-to-date share price performance. From this dataset, we identified the NASDAQ stocks with the largest YTD share price declines as of October 16. The following stocks are listed in descending order of their share price performance.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
DexCom, Inc. (NASDAQ:DXCM)
Year to Date Gain: -44.34%
Number of Hedge Fund Holders: 64
Dexcom is a healthcare company that designs, develops, and commercializes continuous glucose monitoring (CGM) systems. Its products include Dexcom G6 and Dexcom G7, integrated CGM systems for diabetes management.
The stock sank by nearly 40% mid-year after the diabetes management company delivered disappointing second-quarter results and offered weak guidance. While the company posted a 15% increase in revenue to $1 billion, it still missed estimates of $1.04 billion.
In addition to the revenue miss, Dexcom’s projected revenue of between $975 million and $1 billion for the third quarter did not sit well with investors. The situation was exacerbated by a reduction of full-year guidance to between $4 billion and $4.05 billion from a previous guidance of between $4.20 billion and $4.35 billion.
The slow growth has been attributed to fewer new customers and lower revenue per user, which is taking a significant toll on the Dexcom revenue base. Additionally, the company is struggling in the durable medical equipment segment.
While Dexcom is one of the worst-performing stocks in 2024, having lost about 44.34% year to date, its business is not in distress. The fact that the company delivered a 15% increase in revenue in Q2 underscores the fact that there is still growth.
The company’s long-term outlook remains intact, given that it produces and sells continuous glucose monitors (CGMs) that help people with diabetes track their glucose levels. Given the increasing number of people with diabetes worldwide, there will always be a ready market for the company’s products.
In the second quarter of 2024, 64 hedge funds tracked by Insider Monkey held stakes in the stock. Among these, the largest stakeholder was Holocene Advisors, which owned 1.77 million shares valued at approximately $201.05 million.
Here’s what Artisan Partners said about DexCom, Inc. (NASDAQ:DXCM) in its Q2 2024 investor letter:
“Dexcom detracted from performance in the quarter as the stock price gave back all the strong gains from the first quarter of this year. The company reported strong first quarter earnings, beating consensus estimates for the top and bottom lines, highlighted by 25% organic revenue growth. Additionally, it raised the low end of full-year revenue guidance based on the strong start to the year, with record new patient starts. Dexcom is launching an over-the-counter continuous glucose monitoring device set to target the over 25 million Type 2 diabetes patients who are not dependent on insulin. Furthermore, the medical device company recently expanded its salesforce to better address the ~200K primary care physicians in the United States. We see several catalysts going forward, and the stock is trading at a discount to historical valuation metrics.”
Overall DXCM ranks 3rd on our list of 10 Worst Performing NASDAQ Stocks in 2024. While we acknowledge the potential of DXCM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DXCM, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
