Piper Sandler has reaffirmed its Overweight rating on DexCom (NASDAQ: DXCM) with a steady price target of $90.00.
The firm's analyst highlighted the significance of mobile applications in the diabetes care ecosystem, using them as a gauge for the performance of diabetes-related products, particularly DexCom's new Stelo product.
The analysis conducted by Piper Sandler used regression analysis to estimate the demand for DexCom's Stelo in the third quarter and for the entire year by examining the company's other mobile applications.
The findings suggest that Stelo's demand may be falling short of expectations, with projected revenues around $31 million for the year, compared to the anticipated $40 million. Despite this, the firm views the $31 million as a robust addition to DexCom's financials.
Looking ahead, Piper Sandler expects Stelo to generate approximately $126 million in revenue by fiscal year 2025, contributing around 200 basis points to the company's top-line growth. The analysis also compared Stelo's website visits to those of Lingo, indicating that DexCom's strategy to target non-insulin users and pre-diabetics could lead to a more sustainable renewal rate compared to competitors in the over-the-counter continuous glucose monitoring (CGM) market.
In other recent news, DexCom reported a 15.3% increase in earnings, reaching $1,004 million, which fell short of the projected $1,049 million. Following the report, RBC Capital reduced its price target for DexCom from $145.00 to $130.00, maintaining an Outperform rating, while Piper Sandler sustained an Overweight rating.
These recent developments come in the wake of DexCom's strategic partnership with Tandem Diabetes Care (NASDAQ:TNDM), with the t:slim X2 insulin pump software now supporting both DexCom G7 and G6 Continuous Glucose Monitoring (CGM) Systems.
In the competitive landscape, Abbott launched its over-the-counter continuous glucose monitoring system, Lingo, rivaling a similar device by DexCom. Canaccord Genuity maintained its positive stance on DexCom, reiterating a Buy rating following a personal trial of continuous glucose monitoring (CGM) devices.
Despite market challenges, DexCom revised its full-year revenue guidance to 11% to 13% organic growth, with revenue expectations between $4.00 billion and $4.05 billion. The company continues to navigate the dynamic landscape of the diabetes management market.
InvestingPro Insights
To complement Piper Sandler's analysis, recent data from InvestingPro provides additional context for DexCom's financial position. The company's market capitalization stands at $29.1 billion, reflecting its significant presence in the medical devices sector. DexCom's revenue growth of 23.05% over the last twelve months as of Q2 2024 aligns with the analyst's positive outlook on the company's potential for expansion, including the projected contribution from Stelo.
An InvestingPro Tip highlights that DexCom is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.5. This suggests that the stock may be undervalued considering its growth prospects, which could include the anticipated revenue from Stelo and other product lines.
Another relevant InvestingPro Tip indicates that DexCom has been profitable over the last twelve months, with a gross profit margin of 62.73% and an operating income margin of 17.32%. These strong margins support the company's ability to invest in new products like Stelo while maintaining financial health.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for DexCom, providing a deeper understanding of the company's financial position and market performance.
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