DexCom Clears Base, Wall Street Eyes Double-Digit Earnings Growth

Key Points

• Dexcom is aiming for growth, and this year showcased its G7 sensors in a Super Bowl commercial. 
• The company's stock recently cleared a price consolidation above a $126.54 buy point, reaching its best levels in over a year.
• Heavy upside volume in recent weeks indicates strong institutional buying and market confidence about DexCom's prospects.
• Analysts project strong double-digit earnings growth for DexCom this year and next.
• With expanded reimbursements, the market of potential users for DexCom now includes the majority of U.S. diabetes patients.

You generally associate Super Bowl commercials with products made by PepsiCo Inc. NYSE: PEP or the Coca-Cola Co. NYSE: KO, but earlier this year, glucose-monitoring geat maker DexCom Inc. NASDAQ: DXCM forked over some bucks to advertise its G7 sensors.

Pop singer Nick Jonas, a paid DexCom spokesperson, appeared in the Super Bowl ad, as well as in other corporate marketing campaigns.  

DexCom is moving into the forefront in other ways. Its stock recently cleared a price consolidation above a $126.54 buy point. You can see the stock’s recent base and breakout using MarketBeat’s DexCom chart.

Shares are trading at their best levels in over a year, with upside volume heavy in the past several weeks, a good indication of institutional buying.  

Earnings Rebound

Analysts are eyeing strong double-digit earnings increases this year and next. Earnings growth rebounded last year, after decreasing in 2021, although the company has been profitable every year since 2018. 

As DexCom is essentially a technology company in the healthcare industry, it’s in fast growth mode. That means there’s no dividend, and the company says it does not intend to pay dividends for the foreseeable future.

“We currently intend to retain any future earnings to finance the operation and expansion of our business,” it said in regulatory filings, adding, “As a result, stockholders … may only receive a return on their investment in our common stock if the market price of our common stock increases.”

That’s the company throwing down and raising the stakes, acknowledging that it will only reward shareholders with price appreciation, not reward share owners with that comfortable, cozy feeling of getting a dividend payout, even when the stock’s price languishes. 

Double-Digit Revenue Growth

In the past eight quarters, DexCom revenue grew at rates between 17% and 32%. 

DexCom is one of several large-cap price leaders within the medical device industry. Fellow S&P 500 components with good recent price gains include  Medtronic plc NYSE: MDT, Stryker Corp. NYSE: SYK, Boston Scientific Corp. NYSE: BSX, and Zimmer Biomet Holdings Inc. NYSE: ZBH 

Using MarketBeat’s DexCom analyst ratings, you can see that five analysts boosted their price targets on DexCom after the company’s most recent earnings report on April 27.  

The DexCom G7 Super Bowl ad highlighted the company’s innovative solution for diabetes management, eliminating the need to draw blood from fingers. With readings sent directly to smartphones or smartwatches, the real-time continuous glucose management system is an advancement in diabetes care. 

Doubled Prescriber And Patient Base

In a recent investors’ presentation, the company touted some of its recent growth initiatives. In the past two years, the company doubled its total primary care prescriber base, along with the average number of monthly new patients starting in primary care. 

Those are significant growth metrics. 

The stock got a large boost in early March, after the Centers for Medicare and Medicaid Services approved expanded coverage for CGM products to a wider group of type 2 diabetics.  Now, patients who don't require insulin treatment and those with low blood sugar qualify for reimbursements. That shift resulted in a larger market of potential users, as it now includes the majority of U.S. diabetes patients. 

DexCom says its CGM competitors include the Diabetes Care division of Abbott Laboratories NYSE: ABT, Medtronic’s Diabetes Group; Roche Holding AG’s OTCMKTS: RHHVF Diabetes Care unit, and privately-held LifeScan and Ascensia DiabetesCare. Collectively, these companies currently account for the majority of the worldwide sales of self-monitored glucose testing systems, DexCom says. 

Company Aiming For More Growth

It’s pretty obvious that continued innovation and expanding the customer base are the keys to DexCom’s continued growth. In its investors’ presentation, the company said it’s aiming to make inroads in several additional patient markets, including: 

• Type 2 Non-Insulin
• Pre-Diabetes
• Gestational Diabetes
• Patient Monitoring
• Health & Wellness

DexCom shares are currently in the buy range after clearing the $126.54 buy point. However, the broader market was showing weakness in the June 16 and June 20 sessions, and the stock moved slightly lower in after-hours trading on June 20. 

That’s not to say the market is going into a correction, but a pullback may be near, meaning investors should use some extra caution when considering the addition of any stock at this time.