DexCom and Papa John's International have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 5, 2022 – Zacks Equity Research shares DexCom, Inc. DXCM as the Bull of the Day and Papa John's International PZZA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Align Technology ALGN, SmileDirectClub SDC and DENTSPLY SIRONA XRAY.
Here is a synopsis of all five stocks:
Bull of the Day:
DexCom, Inc. is a medical device/wearables company focused on helping people monitor and manage their diabetes. DexCom's top-line growth has been stellar and its addressable market is massive considering how widespread diabetes is in the U.S. and elsewhere.
DexCom shares got caught up in the post-covid lockdown growth-buying wave that began to unwind last fall. The glucose monitoring company is now trading at far more reasonable levels and DXCM shares have been trending upward since the middle of June.
Now might be time for investors to add DexCom stock at these levels for long-term growth upside.
Connected Health Revolution
DexCom makes continuous glucose monitoring systems designed for people with diabetes. The San Diego, California-based firm allows people with diabetes the chance to place a small sensor just beneath their skin—most often on their abdomens—to help them continuously monitor their glucose levels. DexCom's readings and data come through on companion devices or via an app on compatible smartphones, smartwatches and other devices, including offerings from Apple, Google, and others.
DexCom's systems have become widely popular because they don't require people to prick themselves throughout the day in order to measure their glucose levels. DexCom's internet-connected, data-sharing devices are also helpful because they enable family, friends, and healthcare providers to receive data remotely in order to help the users make the proper medical decisions.
The company's continuous glucose monitoring or CGM systems are part of a connected health revolution that's still in the very early days and might be poised to be the standard form of medical care and treatment in the decades to come. DexCom's CGM monitors systems are more beneficial for patients, caregivers, and healthcare professionals compared to more traditional/old school blood glucose meters that check glucose levels at a single moment in time.
Addressable Market and Growth
The simple facts are on DexCom's side as diabetes becomes far more common in the U.S. Over 37 million Americans or about 1 in 10 have diabetes, while 1 in 3 or nearly 100 million Americans have "prediabetes," according to the CDC's 2021 report. Worse still, diabetes is the 8th leading cause of death in the U.S.
Rising diabetes rates, mostly type-2, is not just a U.S. problem, with roughly 540 million adults, or 1 in 10 people around the world living with diabetes. The International Diabetes Federation predicts that the number could climb to 645 million by 2030 and nearly 800 million by 2045.
One of the nearby charts shows DexCom's strong revenue expansion over the past decade. The firm has averaged 34% sales growth in the past five years to climb from $719 million in 2017 to $2.5 billion in FY21. Zacks estimates call for DXCM to post another 18% revenue growth in FY22 and 21% higher in fiscal 2023 to hit $3.5 billion—this is a case where the percentage change slowdown might cloud the fact that DexCom is set to add another $1 billion to its top line between 2021 and 2023.
DexCom is still firmly investing in its growth. Yet, its adjusted earnings are projected to climb 18% this year and another 40% next year to come in at $1.10 per share. DXCM's upward earnings revisions help it land a Zacks Rank #1 (Strong Buy) right now. And the firm has topped EPS estimates for five years running outside of two recent misses.
Price Performance and Valuation
DexCom shares have skyrocketed roughly 2,300% in the past 10 years to blow away the S&P 500's 170% and its Zacks Medical Products Market's 25%. This run includes stretches of sideways movement and even drops. DXCM's outperformance has remained during the past five years. As we mentioned at the outset, the stock had tumbled off its November 2021 peaks alongside nearly every growth-focused stock.
DXCM is trading around 45% below its records at around $91 per share and it still has 23% more room to run before it hits its current average Zacks price target. And the stock has already made a bit of a comeback off its mid-June lows, up over 30%.
DexCom is hardly what anyone would call cheap, but Wall Street is buying it for stellar value. DXCM shares have been impacted by rising interest rates, with investors not willing to pay up as much for future earnings with rates off their rock-bottom levels. DXCM has, in turn, been recalibrated. Its forward PEG ratio (P/E ratio divided by its growth rate) is back at 2.6 vs. its recent highs of a whopping 41.9. These levels put the stock not too far off its industry's 2.2 despite its huge outperformance.
Bottom Line
DexCom might not be the safest near-term play amid the uncertainty about the interest rate environment. Still, investors with long-term outlooks might want to consider starting a position in the diabetes-focused connected medical products company for its long-term upside.
DexCom should benefit from the growing prevalence of diabetes and it could possibly expand into new areas of the connected health world given its strong balance sheet and rising cash position. Plus, 12 of the 14 brokerage recommendations Zacks has are "Strong Buys."
Bear of the Day:
Papa John's International is a pizza delivery powerhouse that's facing tough-to-compete against periods, a growing assortment of food delivery options, and other headwinds.
Possible Pizza Fatigue?
Papa John's is the world's third-largest pizza delivery company with over 5,500 restaurants in roughly 50 countries and territories. Papa John's competes against Domino's Pizza, other local chains, and higher-end places in the take-out pizza market.
Papa John's and other companies benefited from the stay-at-home covid boost over the last few years, as well as a willingness from consumers to eat out during a period of economic growth and positivity.
PZZA's earnings revisions have been trending in the wrong direction lately amid a shifting economic and consumer spending landscape. Papa John's executive team last quarter pointed to higher labor costs and commodity prices as a reason for its subdued outlook, alongside lower international sales, specifically "softening economic conditions in the UK."The pizza maker's FY22 and FY23 consensus estimates have dropped 6% and 7.5%, respectively over the last 60 days and slightly more if we go back a bit farther. Zacks estimates call for PZZA's 2022 revenue to climb by 2% and then pop around 5% in FY23. These estimates follow 14% revenue growth last year and 12% in FY20.
Papa John's is projected to see its adjusted earnings slip by 15% in 2022 to $2.99 per share, before bouncing back to just under its FY21 total next year. The company's overall downward earnings estimate revisions help it land a Zacks Rank #5 (Strong Sell) at the moment.
Bottom Line
Papa John's shares have fallen over 40% in 2022 even as its broader industry dropped just 14%. PZZA's 2022 tumble roughly matches its rival Domino's, with Papa John's now down 9% over the last two years and DPZ 22% lower.
Wall Street appears worried about the possibility of pizza delivery fatigue and the sustained challenges from many other restaurants who have found success through food delivery apps such as Uber Eats. All told, investors might want to stay away from Papa John's stock right now amid slowing consumer spending, high inflation, and growing non-pizza competition in the at-home delivery industry.
Additional content:
3 Stocks from the Growing Orthodontics Space in Focus
The pandemic-led crisis spanning two and a half years forced the dental industry to incline toward digital treatment options. The industry bore the brunt of the closure of dental practices and lower patient visits due to the risk of exposure to the virus and more focus on COVID-related treatments.
However, digital orthodontics has been gaining traction lately. It offers advanced teeth straightening options while safeguarding dentists from the contagious virus.
This subsegment of dental treatment entails the improvement of the arrangement and appearance of protruding, crowded or crooked teeth. It also pertains to correcting problems related to misaligned bites.
Growing Trend
Going by a Fortune Business Insights report, the global clear aligners market size was $2.41 billion in 2020, exhibiting lower growth of 4.4% compared with the average year-over-year growth from 2017 to 2019.
However, the market has experienced substantial recovery, primarily owing to the easing of restrictions and mass opening up of the economy in 2022. Apart from this, rising dependence on Artificial Intelligence (AI) & Robotics and teledentistry and an increase in the number of patient visits are likely to help the industry thrive in the near term.
The latest technologies are helping orthodontic surgeons in carrying out minimally-invasive procedures that ensure precision and efficiency, thereby reducing patients' trauma. The industry players actively promote digital workflows for general dentistry and dental specialties. Further, dental 3D printers are revolutionizing dentistry. These reduce time and cost through efficient utilization of orthodontics and dental practices.
Accordingly, going by the same report, this industry is projected to grow from $2.85 billion in 2021 to $10.04 billion in 2028 at a CAGR of 19.7% in the forecast period 2021-2028.
Orthodontics players like Align Technology, SmileDirectClub and DENTSPLY SIRONA are likely to gain from the changing opportunities within the orthodontic space.
Stocks to Watch
Align Technology: In September 2022, Align introduced Invisalign Virtual Care AI, its next-generation remote monitoring solution with new artificial intelligence-assisted capabilities that streamline workflows for doctors and their staff. It has features like patient enrollment, setup, and review directly on the Invisalign Doctor Site without the need to use separate standalone solutions. Prior to this, the company announced its new Invisalign systems innovations for the Align Digital Platform. These latest innovations include ClinCheck Live Update for 3D controls, the Invisalign Practice App, Invisalign Personalized Plan, or IPP, and the Invisalign Smile Architect.
In terms of 3D scanners, in the last-reported second quarter of 2022, the number of intraoral digital scans used for Invisalign case submissions reflected the continued adoption of digital scanners and a larger installed base. Total worldwide intraoral digital scan submitted to start an Invisalign case in Q2 increased to 88.4% from 82.2% in the year-ago period.
SmileDirectClub: Realizing the enormous prospects of this space, SmileDirectClub has extended its teledentistry platform to dental and orthodontic offices through a collaborative model, designed specifically for dentists who currently do not offer an orthodontic product to patients, and an office-directed model, designed for orthodontists and dentists as a traditional in-office clear aligner product.
The company is currently providing a doctor-directed digital end-to-end experience in teledentistry, with 24/7 access to orthodontic care and the back end of a lifetime smile guarantee. The company continues to see favorable industry dynamics with broader acceptance of telehealth and specifically, teledentistry.
The company continues to see growth in the adoption and use of teledentistry by the dental and orthodontic industries. This is further boosted by the expansion of the company's professional partnerships and well-established and respected national DSOs, which demonstrate the adoption of telehealth by the dental community.
DENTSPLY SIRONA: In a bid to revolutionize digital-implant workflow in dental care, DENTSPLY's single tooth replacement solution — Azento — needs special mention. It revolutionizes the digital implant workflow by restructuring implant-planning service, purchase and delivery. Management remains optimistic about the long-term potential of the company's digital dentistry and workflow management as it is well positioned with respect to the diagnostic expertise of its X-ray portfolio, which is critical for implants.
DENTSPLY has been witnessing a rising trend in dental offices, upgrading from 2D to 3D units, which has also been observed in all global markets. In the last fiscal, digital diagnostic devices like Primescan, Axeos and Orthophos delivered solid growth. In three years, the company scaled its clear aligners from having no presence in the digital diagnostic space to a business that delivered $274 million in 2021.
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Align Technology, Inc. (ALGN) : Free Stock Analysis Report
DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
Papa John's International, Inc. (PZZA) : Free Stock Analysis Report
SmileDirectClub, Inc. (SDC) : Free Stock Analysis Report
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