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Dexcom (DXCM) Hits a 52-Week High: What's Driving the Stock?

Zacks Equity Research

On Nov 22, shares of Dexcom DXCM scaled a new 52-week high of $223.52, closing the session marginally lower at $221.85. In fact, the stock has rallied nearly 44.9% since its third-quarter earnings announcement on Nov 6.

Rising volumes across all channels, strong patient additions, increasing global awareness of the benefits of real-time CGM and impressive full-year guidance prompted the rally.

Let us take a closer look at the factors driving growth.

Robust Q3 Earnings

The company exited the third quarter on a promising note, with better-than-expected earnings and revenue numbers. International revenues improved 36.1% year over year during the quarter. Per management, international growth was strong, opening up great opportunity on improving global access and awareness.

Gross profit in the quarter rose a stupendous 46.4% year over year.

The company reported operating income of $56 million, compared with the year-ago quarter’s $13.9 million.

The lifted revenue outlook for 2019 buoys optimism among investors, indicating the continuation of this bullish trend through the rest of the year.

Other Encouraging Factors

In September 2019, DexCom started selling G6 in Canada and received great response. In early October, the company commenced the shipping of G6 to Medicare patients. The company recently made submission of its G6 Pro product that is expected to be launched in 2020.

Moreover, investors are optimistic about the company’s partnership with Walgreens to ensure that all Medicare patients can fill their prescriptions for DexCom CGM through any of Walgreens’ nationwide retail locations. The company anticipates more growth for the CGM diagnostic tool market.

The market is upbeat about the company being poised to achieve its long-term target on the expansion of the G6 rollout and improved access to CGM. With this growing demand in mind, the company is on track to meet its goal of doubling G6 capacity by 2019-end. The company has been driving the ongoing transition to G6 in additional international markets. Per management, DexCom is making progress toward finalizing G7 CGM system and projects a late 2020 or early 2021 initial launch.

Meanwhile, Dexcom has been having a great run on the bourses in the past year. The stock has rallied 76.1%, higher than the broader industry’s growth of 10.2%. The company currently has a market cap of $20.31 billion.

Zacks Rank & Other Stocks Worth a Look

Dexcom currently carries a Zacks Rank #1 (Strong Buy).

A few other top-rankedstocks from the broader medical space are Haemonetics Corporation HAE, NuVasive, Inc NUVA and ResMed RMD. While Haemonetics carries a Zacks Rank #1, the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics has a projected long-term earnings growth rate of 13.5%.

NuVasive has an expected long-term earnings growth rate of 10.9%.

ResMed has a long-term earnings growth rate of 12.9%.

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