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Reasons to Add DexCom (DXCM) Stock to Your Portfolio Now
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DexCom, Inc. (DXCM - Free Report) is well poised for growth in the coming quarters, backed by its strong product portfolio. A robust third-quarter 2023 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, risks related to stiff competition persist.
This Zacks Rank #2 (Buy) company’s shares have lost 7.5% year to date compared with the industry’s 8.6% decline. The S&P 500 Index has risen 18.3% in the same time frame.
DXCM, a renowned medical device company and provider of continuous glucose monitoring (CGM) systems, has a market capitalization of $39.45 billion. It projects 33.6% growth over the next five years and expects to maintain the strong performance going forward.
Image Source: Zacks Investment Research
DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 36.43%.
Let’s delve deeper.
Strong Product Demand: We are upbeat about DexCom's continued strength in its Continuous Glucose Monitoring (CGM) products.
The company continues to expand its product portfolio with the addition of new products like DexCom One and G7 sensor. This has helped accelerate its growth. Sales of these products have reflected strong demand since their launch late last year. Impressive contributions from the Sensor segment, and domestic and international revenue growth were the key catalysts. Moreover, the expansion of coverage for CGM systems during the quarter supported growth. This trend is likely to continue for the rest of 2023. The availability of new sensors like G6 & G7 in new international markets is also boosting revenue growth.
Additionally, the glucose monitoring market presents significant commercial opportunities for the company. DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it with a competitive edge in the MedTech space.
New Product Launch: In June, Dexcom announced that it 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. The company’s G7 CGM System is already covered by all major pharmacy benefit managers in the United States, following its launch late last year. In 2022, 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 leveraging its G6 CGM System via Prince Edward Island’s Diabetes Glucose Sensor Program.
DexCom ended the third 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 Q3 Results: DXCM’s solid third-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. In October, the company raised its guidance for 2025 based on robust demand for its products in the previous two years. The company now expects an additional $3.55 billion in revenues compared with the earlier projected band of $3.5-$3.55 billion.
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 30 basis points during the third quarter to 62.7%, reflecting the rising cost of sales. It expects an adjusted gross margin of approximately 64% 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 60 days, the Zacks Consensus Estimate for earnings has increased from $1.23 per share to $1.43 for 2023 and from $1.59 to $1.68 for 2024.
The consensus mark for the company’s fourth-quarter 2023 revenues is pegged at $1 billion, indicating a 23.3% improvement from the year-ago quarter’s reported number. The same for earnings is pinned at 42 cents per share, implying growth of 23.5% year over year.
Cardinal Health has an estimated long-term growth rate of 15.2%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.67%.
CAH’s shares have rallied 35.4% year to date.
Biodesix has an estimated growth rate of 22.7% for 2024. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 9.76%.
BDSX’s shares have lost 44.8% year to date.
Patterson Companies has an estimated long-term growth rate of 9.2%. PDCO’s earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 8.47%.
PDCO’s shares have risen 8.8% year to date.
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Reasons to Add DexCom (DXCM) Stock to Your Portfolio Now
DexCom, Inc. (DXCM - Free Report) is well poised for growth in the coming quarters, backed by its strong product portfolio. A robust third-quarter 2023 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, risks related to stiff competition persist.
This Zacks Rank #2 (Buy) company’s shares have lost 7.5% year to date compared with the industry’s 8.6% decline. The S&P 500 Index has risen 18.3% in the same time frame.
DXCM, a renowned medical device company and provider of continuous glucose monitoring (CGM) systems, has a market capitalization of $39.45 billion. It projects 33.6% growth over the next five years and expects to maintain the strong performance going forward.
Image Source: Zacks Investment Research
DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 36.43%.
Let’s delve deeper.
Strong Product Demand: We are upbeat about DexCom's continued strength in its Continuous Glucose Monitoring (CGM) products.
The company continues to expand its product portfolio with the addition of new products like DexCom One and G7 sensor. This has helped accelerate its growth. Sales of these products have reflected strong demand since their launch late last year. Impressive contributions from the Sensor segment, and domestic and international revenue growth were the key catalysts. Moreover, the expansion of coverage for CGM systems during the quarter supported growth. This trend is likely to continue for the rest of 2023. The availability of new sensors like G6 & G7 in new international markets is also boosting revenue growth.
Additionally, the glucose monitoring market presents significant commercial opportunities for the company. DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it with a competitive edge in the MedTech space.
New Product Launch: In June, Dexcom announced that it 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. The company’s G7 CGM System is already covered by all major pharmacy benefit managers in the United States, following its launch late last year. In 2022, 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 leveraging its G6 CGM System via Prince Edward Island’s Diabetes Glucose Sensor Program.
DexCom ended the third 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 Q3 Results: DXCM’s solid third-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. In October, the company raised its guidance for 2025 based on robust demand for its products in the previous two years. The company now expects an additional $3.55 billion in revenues compared with the earlier projected band of $3.5-$3.55 billion.
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 30 basis points during the third quarter to 62.7%, reflecting the rising cost of sales. It expects an adjusted gross margin of approximately 64% 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 60 days, the Zacks Consensus Estimate for earnings has increased from $1.23 per share to $1.43 for 2023 and from $1.59 to $1.68 for 2024.
The consensus mark for the company’s fourth-quarter 2023 revenues is pegged at $1 billion, indicating a 23.3% improvement from the year-ago quarter’s reported number. The same for earnings is pinned at 42 cents per share, implying growth of 23.5% year over year.
DexCom, Inc. Price
DexCom, Inc. price | DexCom, Inc. Quote
Other Stocks to Consider
Some other top-ranked stocks from the same medical industry are Cardinal Health (CAH - Free Report) , Biodesix (BDSX - Free Report) and Patterson Companies (PDCO - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has an estimated long-term growth rate of 15.2%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.67%.
CAH’s shares have rallied 35.4% year to date.
Biodesix has an estimated growth rate of 22.7% for 2024. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 9.76%.
BDSX’s shares have lost 44.8% year to date.
Patterson Companies has an estimated long-term growth rate of 9.2%. PDCO’s earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 8.47%.
PDCO’s shares have risen 8.8% year to date.