DexCom (DXCM) Stock Hits 52-Week High: More Room to Grow?
DexCom, Inc. DXCM is well poised for growth in the coming quarters, backed by its strong product portfolio. A robust first-quarter 2023 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, risks related to stiff competition and reimbursement persist.
This Zacks Rank #2 (Buy) company’s shares have risen 18.3% year to date compared with the industry’s 9.9% growth. The S&P 500 Index has gained 17.3% in the same time frame.
DXCM, a renowned medical-devices company and provider of continuous glucose monitoring (CGM) systems, has a market capitalization of $51.82 billion. It projects 40.4% growth over the next five years and expects to maintain the strong performance going forward.
DexCom’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, delivering an average surprise of 15.19%.
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Let’s delve deeper.
Strong Product Portfolio:We are upbeat about DexCom's continued strength in its Continuous Glucose Monitoring (CGM) products.
It launched an updated sensor algorithm in multiple countries in the second half of 2022, making the latest G7 sensor technology available in international markets. The company received the FDA clearance for this technology in December 2022.
Earlier this month, the G7 CGM System received Health Canada’s approval for people with all types of diabetes, aged two years and above. These developments are likely to support DXCM’s future growth.
In 2022, the company also launched the easy-to-use Dexcom ONE real-time CGM System on prescription for everyone with type 1 or type 2 diabetes using insulin. It did so via drug tariff in NHS England, Wales, Scotland and Northern Ireland.
DexCom’s prospects in alternative markets, such as non-intensive diabetes management, hospitals, gestational, pre-diabetes and obesity are likely to provide it with a competitive edge in the MedTech space.
New Product Launch: Last month, Dexcom announced that is currently developing a new product with a 15-day sensor, designed specifically for diabetic patients who are not on insulin. The company is planning to launch the new product in the United States in 2024.
Positive Coverages: DXCM’s products have been receiving increasing coverage over the past few months, raising our optimism. Last year, the company expanded public coverage for type 1 and type 2 diabetic patients (aged two years and above) who are on multiple daily injections of insulin (three or more) or who use an insulin pump using its G6 CGM System via Prince Edward Island’s Diabetes Glucose Sensor Program.
DexCom ended the first quarter with new patient additions.
The Ontario government began coverage for the Dexcom G6 CGM System through the province’s Assistive Devices Program. This program has been designed for provincial people with type 1 diabetes, who are above the age of two and meet the coverage criteria.
Strong Q1 Results: DXCM’s solid first-quarter 2023 revenues buoy optimism. Rising volumes across all channels, along with new customer additions due to increasing global awareness of the benefits of real-time CGM, contributed to the upside. Last month, the company raised its guidance for 2025, based on robust demand for its products in the previous two years. The company now expects growth of $500 million in revenues (from that projected earlier).
Impressive contributions from the Sensor segment, and domestic and international revenue growth were the key catalysts. Additionally, the glucose monitoring market presents significant commercial opportunities for DXCM.
Downsides
Rising Costs: The company’s gross margin contracted 90 basis points during the first quarter to 62.4%, reflecting the rising cost of sales. It expects adjusted gross margin of 62-63% for 2023, indicating persisting cost pressure.
Stiff Competition: The market for blood glucose monitoring devices is highly competitive, subject to rapid changes and new product introductions. DXCM’s competitors manufacture and market products for the single-point finger stick device market and collectively account for the worldwide sales of self-monitored glucose testing systems at present.
Estimate Trend
DexCom is witnessing an improving estimate revision trend for 2023 and 2024. In the past 30 days, the consensus mark for earnings per share increased from $1.06 to $1.07 for 2023 and from $1.47 to $1.50 for 2024.
The Zacks Consensus Estimate for the company’s second-quarter 2023 revenues is pegged at $837 million, indicating a 20.2% improvement from the year-ago quarter’s reported number. The same for earnings is pinned at 22 cents per share, implying growth of 29.4% year over year.
DexCom, Inc. Price
DexCom, Inc. price | DexCom, Inc. Quote
Other Stocks to Consider
A few other top-ranked stocks from the broader medical space are Alcon ALC, Perrigo Company PRGO and Hologic HOLX, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alcon has an estimated long-term growth rate of 14.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.85%.
ALC’s shares have rallied 22.8% year to date compared with the industry’s 8.4% growth.
Perrigo’s earnings are expected to improve 24.6% in 2023. The strong momentum is likely to continue in 2024 as well. PRGO’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, delivering an average negative surprise of 0.79%.
The company’s shares have lost 0.4% year to date against the industry’s 5.3% growth.
Hologic has an estimated earnings growth rate of 4.1% for fiscal 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 27.32%.
HOLX’s shares have risen 5.6% year to date compared with the industry’s 8.4% growth.
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