Back to top

Image: Bigstock

Here's Why You Should Hold On to DexCom (DXCM) Stock Now

Read MoreHide Full Article

With a market capitalization of approximately $12.05 billion, DexCom, Inc. (DXCM - Free Report) is expected to benefit from lucrative prospects in the diabetes market, strong product portfolio, collaborative agreements with several companies and focus on international markets. However, the company’s margins were under pressure in the last reported quarter.

Which Way are the Estimates Treading?

For the current quarter, the Zacks Consensus Estimate is pegged at a loss of 10 cents per share, reflecting a decline of 150% on a year-over-year basis. The same for the revenues is pegged at $239.5 million, reflecting an increase of 29.7% year over year.

For 2018, the Zacks Consensus Estimate for revenues is pegged at $929.1million, reflecting growth of 29.3%.

The stock has a Zacks Rank #3 (Hold). Here we take a quick look at the primary factors that have been plaguing DexCom and henceforth discuss the prospects that ensure near-term recovery of the stock.

DexCom, Inc. Price and Consensus

 

What's Deterring DexCom?

DexCom reported loss in second-quarter 2018, narrower than the Zacks Consensus Estimate.

The company’s second-quarter gross profit totaled $154 million generating a gross margin of 63.3%, down 320 basis points (bps) year over year on an adjusted basis. Escalating non-recurring expenses, as the company ramped production volumes faster than anticipated, resulted in lackluster margin trends.

Further, earlier-than-anticipated G6 launch resulted in unexpected excess and obsolete charges related to DexCom’s G5 hardware.

Owing to the lackluster trends, DexCom lowered margin guidance for 2018. Gross profit margin is projected to be just 64% of net revenues in 2018, lower than the previous guidance of 65-68%.

Why Should You Still Hold?

In 2017, DexCom announced the receipt of FDA approval of the Dexcom G5 mobile app for Android devices.

Coming to the G6 CGM System, in June, the company announced that it has received CE Mark for its DexCom G6 System for people with diabetes aged two years and above. The company is optimistic about its G6 sensor.

By the end of the second quarter of 2018, management announced that DexCom G6 represents the most important and complex launch in the company’s history. DexCom G6 is highly exclusive in the market because it functions without finger-stick calibrations.

Share Price Performance

DexCom’s shares have outperformed the industry in a year’s time. Notably, the company’s shares have surged 86.9%, against the industry’s decline of 4%. The current level is also higher than the S&P 500 index’s rise of 19%.

 

Want More from the MedTech Space?

A few better-ranked stocks in the MedTech space are Penumbra, Inc. (PEN - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Illumina, Inc. (ILMN - Free Report) . All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra has a long-term expected earnings growth rate of 20%, while the same for Integer Holdings and Illumina is pinned at 15% and 22.1%, respectively.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>