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Dexcom
DXCM-Q
BUY ON WEAKNESS
Oct 11, 2023
$78.040
Stock price when the opinion was issued
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COMMENT
The stock got overheated and has pulled back. It's up over 50% YTD. The quarter they reported in late-October was imperfect with a big earnings beat but a smaller sales beat compared to previous quarter. Their new blood sugar monitor is rolling out in only some key markets in 2021, not in all key ones until 2023. Both factors led to the stock getting hurt. Today, management guided for 15-20% growth through 2025, but fell short of expectations. The stock sold off today.
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BUY
They make blood-sugar monitor for diabetics. He has long liked this. Performed well last year until Covid delayed the development in their new device which happened when the market lost interest in health stocks. But a few months ago, it started to come back. Yesterday, they reported a mixed quarter with a nice revenue beat, but small earnings miss, yet offered conservative guidance expand overseas. It fell 5% today. Likes that they're spending money to grow and their conservative nature.
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COMMENT
They make blood sugar monitors used by diabetics. One of the best growth stocks of the last 5 years, from $60 from end-2017 to $659 last November. Since then, it's plunged to $462. Today, the company reported Q4 sales were in line and issued cautious guidance for 2022. They under-promise and over-delivered.
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DXCM has been hit hard as investors fear new success of weight loss drugs will reduce demand for diabetes monitoring products. DXCM is not alone in the decline. But it is still growing, and recent comments by analysts suggest the sell off is quite overdone. It has new products on tap and is strong financially. Market share remains robust. Best Buy has started selling its products (not material on its own, but shows an expanding footprint). We would see DXCM as worth holding. Because it is 33X as large was WELL, they are hard to compare. WELL, being smaller, could potentially rise more, but comes with much more overall risk. From a safety and valuation standpoint, we would, today, prefer DXCM.
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