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Reiterate DexCom at Neutral

Zacks Equity Research

On Feb 28, 2013, we retained DexCom (DXCM) at Neutral after the company beat Zacks Consensus Estimates for earnings and revenue for fourth quarter 2012.

Why the Retention?

DexCom released its results for the fourth quarter on Feb 21. The company posted adjusted loss per share of 14 cents per share, better than the Zacks Consensus Estimate of a loss of 16 cents a share. Revenues in the reported quarter surged 48.7% year over year to $33.3 million, beating the Zacks Consensus Estimate of $29 million.

Over the past 30 days, the Zacks Consensus Estimate for 2013 has moved down by 6 cents to (54) cents and for 2014 it has dropped by 4 cents to (20) cents during the same timeframe.

DexCom is well placed in the industry that it serves. Given the burgeoning diabetes population in the U.S., its G4 Platinum presents considerable market opportunity. Successful commercialization of G4 Platinum in the U.S. could just be the catalyst that the company needs to gain share in the market it serves.

Increased awareness and acceptance of the need for continuous glucose monitoring and international expansion should help drive sales of DexCom’s products. The company is eyeing prospects in the vast markets of India, China and Japan.

In addition to upgrading and enhancing the functions of existing products, DexCom has also been active on the collaboration front, through which it is looking to leverage its technology with its collaborator’s product offerings.

We believe that the company’s move to buy healthcare IT company SweetSpot Diabetes Care, may allow it to compete more effectively through better data management systems.

Despite increasing revenues, DexCom remains a loss-making entity and its efforts are made more difficult by a stringent regulatory environment. Competition in the glucose monitoring market is fierce. DexCom currently holds a Zacks Rank #3 (Hold).

Other Stocks to Consider

Cyberonics Inc. (CYBX) and ABIOMED, Inc. (ABMD) carry a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively, and are expected to do well. In addition, Sirona Dental Systems Inc. (SIRO) retains a Zacks Rank #2 (Buy) and warrants a look.

Read the Full Research Report on DXCM

Read the Full Research Report on ABMD

Read the Full Research Report on CYBX

Read the Full Research Report on SIRO

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