On Friday, UBS analyst Danielle Antalffy revised the price target for DexCom (NASDAQ:DXCM), a Continuous Glucose Monitoring (CGM) system manufacturer, reducing it to $95.00 from the previous $163.00 while retaining a Buy rating on the stock.
The adjustment follows a significant after-hours share price decline of approximately 37% due to DexCom's reported sales falling short by around 3.5%. Consequently, the company has also lowered its full-year 2024 guidance, now expecting organic sales growth of 11-13%, a decrease from the previously anticipated 17-21%.
The analyst expressed surprise at the results, which did not align with the expectation of a CGM adoption inflection point. Despite the disappointing quarter, the belief is that DexCom's long-term prospects remain strong as the transition to standard of care continues.
It is suggested that the second quarter's performance issues are correctable, as implied by management's reaffirmation of hitting at least the lower end of the $4.6 billion to $5.1 billion target for 2025.
The report acknowledges the challenges DexCom faces for the rest of the year, which may cast doubt on market saturation and commoditization concerns. However, based on year-long industry checks, UBS maintains a positive outlook on the CGM market.
It is anticipated that CGM will become a standard care component for all diabetics, including over 25 million non-insulin users, in the coming years. The market is expected to be dominated by DexCom and one other player, with both likely to experience at least 20% annual volume growth.
The analyst concluded that while the exact revenue per patient remains a question, DexCom is expected to return to and sustain high-teens or even 20%+ growth rates in the upcoming quarters as the company addresses its execution issues.
In other recent news, DexCom, the medical device company, reported a second-quarter revenue shortfall, with earnings of $1,004 million, a 15.3% year-over-year increase but below the anticipated $1,049 million.
Despite this, DexCom's adjusted earnings per share (EPS) of $0.43 surpassed both the $0.40 estimate and the consensus of $0.39. In response to these results, Canaccord Genuity adjusted its price target for DexCom, reducing it to $89 from the previous figure of $145, but maintained a Buy rating for the stock.
These are recent developments following DexCom's report of a 15% growth in worldwide revenue to $1.004 billion, with organic growth at 16%. However, the company faced challenges with lower-than-expected new customer starts in the US and a decrease in revenue per customer.
Consequently, DexCom has lowered its full-year revenue guidance to 11% to 13% organic growth and revised its revenue expectations to $4.00 billion to $4.05 billion.
Despite these challenges, DexCom is taking strategic measures to enhance its competitive position, including the upcoming launch of its Stelo product and a share repurchase program of up to $750 million.
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