DexCom Faces Stock Decline Amid Revised Sales Guidance

DexCom stock has experienced significant declines, approximately 53% since April, following lowered sales projections. Despite initial healthy gains, the report highlights both competitive threats and a vast addressable market that could shape future growth.

Date: 02-10-2024

AI Rating: 5

The report highlights significant fluctuations in DexCom (NASDAQ: DXCM) stock throughout the year. The stock is down about 53% from its peak in April, primarily due to management's lowered sales guidance. In the second quarter, although sales rose 15% year-over-year, third-quarter sales growth is projected to be only 1% to 3%. Most concerning is the lowered revenue forecast for the full year to a range of $4 billion to $4.05 billion, down from an earlier expectation of $4.2 billion to $4.35 billion.

This lack of clarity in growth trajectory is troubling for investors, especially as their leading competitor, Abbott Laboratories (NYSE: ABT), continues to see strong performance without similar warnings. Abbott's FreeStyle Libre sales increased by 18.4%, revealing a significant competitive edge over DexCom's revenue in the same sector.

DexCom's operating environment includes vast opportunities as diabetes and prediabetes rates rise; about 29.4 million adults have diabetes in the U.S., with an additional 8.7 million presumably undiagnosed. The recent launch of Stelo, an over-the-counter CGM for non-insulin users, suggests an effort to penetrate this growing market.

However, caution persists as DexCom faces substantial competition; Medtronic has introduced new CGM technology and is collaborating with Abbott, intensifying pressure on DexCom. Furthermore, the company's high forward price-to-earnings ratio of approximately 39.8 indicates potential overvaluation, especially given current growth expectations.

The overall sentiment is that DexCom, while positioned in a large market, may struggle in the near term due to competition and misalignment in sales expectations.

Stocks: DXCM ABT