On Monday, Oppenheimer maintained its Outperform rating and $150.00 price target for DexCom (NASDAQ:DXCM), a leader in continuous glucose monitoring (CGM) systems. The firm's stance comes in light of recent developments in the CGM market, with rival Abbott (ABT) receiving FDA approval for its Lingo CGM for over-the-counter sales. DexCom is poised to launch its own over-the-counter CGM, Stelo, in the upcoming summer, with more details expected to be revealed at the American Diabetes Association (ADA) meeting later in June.
Abbott's Lingo Glucose Tracking System, which received FDA approval late last week, is a direct competitor to DexCom's Stelo. Both devices are in the same regulatory category, but no specific launch date for Lingo has been provided. Abbott had previously announced Lingo last year and has been selling it in the UK since January 24, 2023, suggesting a strategic move into the US market had been planned.
In the UK, Lingo is marketed at £89 for a two-week introductory pack, followed by a £120 monthly plan. This pricing is slightly higher than the anticipated cost for DexCom's Stelo in the United States. Oppenheimer's analysis suggests that the CGM market has the capacity to support multiple products, given the large untapped market segments that exist beyond intensive insulin users.
The potential for CGM adoption among Type 2 diabetes patients not on insulin therapy and the pre-diabetes population in the US is significant. Oppenheimer's report highlights that there are approximately 25 million people in the US with Type 2 diabetes not using insulin and an estimated nearly 100 million adults with pre-diabetes. This suggests a considerable market opportunity for DexCom's Stelo and other CGM systems targeting these groups.
InvestingPro Insights
As DexCom (NASDAQ:DXCM) gears up for the launch of its Stelo CGM system, the company's financial health and market position offer additional context for investors. With a robust market cap of $45.71 billion and a significant revenue growth of 25.78% over the last twelve months as of Q1 2024, DexCom is showing a strong capacity to expand in the competitive CGM market. The company's gross profit margin stands at a healthy 62.82%, underscoring its ability to maintain profitability despite new market entrants.
An InvestingPro Tip notes that DexCom has been trading at a high earnings multiple, with a P/E ratio of 69.57 and an adjusted P/E ratio for the last twelve months as of Q1 2024 at 71.73. This indicates high investor expectations for future earnings growth, supported by a PEG ratio of 0.64, which suggests that the company's earnings growth could justify its P/E ratio. Additionally, DexCom's liquid assets exceed its short-term obligations, and cash flows can sufficiently cover interest payments, providing financial stability as it navigates the CGM market dynamics.
For those looking to delve deeper into DexCom's financials and future outlook, there are over 10 additional InvestingPro Tips available at https://www.investing.com/pro/DXCM. Investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to comprehensive analyses that can inform investment decisions in the evolving landscape of medical technology.
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