On Friday, RBC Capital adjusted its outlook on shares of DexCom (NASDAQ:DXCM), a medical device company specializing in glucose monitoring systems. The firm reduced the price target to $145 from the previous $165, while reiterating an Outperform rating on the stock.
The revision followed DexCom's second-quarter earnings report, which revealed a 3% shortfall in sales against expectations.
The company's earnings per share (EPS), however, outperformed estimates by 10%. RBC Capital attributed the sales miss to three primary factors: a realignment that fell short of expectations within the U.S. salesforce, a decrease in U.S. revenue per customer due to factors such as G7 rebate eligibility and disruptions in durable medical equipment (DME) sales, as well as weaker than anticipated sales outside the United States.
These issues contributed to a slower rate of new customer acquisition during the quarter, an effect that is expected to extend into the second half of 2024. Consequently, DexCom has reduced its sales growth forecast for the year by 700 basis points, now anticipating an increase of 11-13% year-over-year.
Despite the setbacks in execution, RBC Capital remains optimistic about DexCom's potential. The firm's analyst cited discussions with management, suggesting that the 40% decline in the company's stock price post-market was an overreaction. The analyst's stance is that the current weakness presents a buying opportunity, affirming the Outperform rating even with a lowered price target.
In other recent news, DexCom, a Continuous Glucose Monitoring (CGM) system manufacturer, faced a significant reduction in target prices from UBS and Canaccord Genuity, despite maintaining a buy rating from both firms.
This follows DexCom's recent announcement of 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. The company's adjusted earnings per share (EPS) of $0.43 surpassed both the $0.40 estimate and the consensus of $0.39.
Despite lower-than-expected new customer starts in the US and a decrease in revenue per customer, DexCom remains optimistic about its long-term global prospects. The company 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.
To enhance its competitive position, DexCom plans to launch its Stelo product and has initiated a share repurchase program of up to $750 million. UBS and Canaccord Genuity analysts expect DexCom to overcome its second-quarter performance issues and maintain strong growth rates in the upcoming quarters, bolstered by the continuous growth of the CGM market.
InvestingPro Insights
In light of RBC Capital's recent outlook adjustment on DexCom, reviewing the latest metrics and insights from InvestingPro can provide additional clarity for investors. DexCom's market capitalization stands at $43.22 billion, reflecting its significant presence in the medical device sector. Despite recent challenges, the company's revenue growth remains robust, with a 25.78% increase over the last twelve months as of Q1 2024. This growth is consistent with the company's strategy and market positioning.
InvestingPro Tips highlight that DexCom is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential for those focusing on earnings expansion. Additionally, the company's cash flows are able to sufficiently cover interest payments, indicating financial stability. With 12 additional InvestingPro Tips available, investors can gain a comprehensive understanding of DexCom's financial health and market potential. For those interested, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking valuable insights that could inform investment decisions.
Furthermore, the company's stock is trading at 75.95% of its 52-week high, and analysts predict the company will be profitable this year, which could interest long-term investors. While the near-term outlook may have its uncertainties, the company's solid fundamentals and the potential upside reflected in the fair value estimates from analysts and InvestingPro suggest that the current market price may present an opportunity for investors.
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