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3 Reasons to Hold DexCom (DXCM) Stock in Your Portfolio

DexCom, Inc. DXCM is well-poised for growth in the coming quarters, backed by its strong product portfolio. A robust second-quarter 2022 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, stiff competition and reimbursement risks persist.

So far this year, this Zacks Rank #3 (Hold) stock has lost 38.9% compared with 35.5% decline of the industry and a 22.7% decline of the S&P 500.

The renowned medical devices company and provider of continuous glucose monitoring (CGM) systems has a market capitalization of $32.92 billion. The company projects 31.4% growth for the next five years and expects to maintain its strong performance. DexCom’s earnings surpassed the Zacks Consensus Estimate in one of the trailing four quarters, missed the same in two and matched estimates in one, delivering a negative earnings surprise of 3.4%, on average.


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Let’s delve deeper.

Strong Product Portfolio: We are upbeat about DexCom's continued strength in its CGM products. The company, in August, announced the availability of the easy-to-use Dexcom ONE real-time CGM (rt-CGM) System on prescription via the NHS England, Wales, Scotland and Northern Ireland drug tariff to everyone with type 1 or type 2 diabetes using insulin.

In June, DexCom announced its plans to showcase its expanded global portfolio of rt-CGM systems at the Scientific Sessions of the American Diabetes Association conference.

Positive Coverages: DexCom's products have been receiving increasing coverage over the past few months, raising our optimism. The company, in June, announced that people with type 1 and type 2 diabetes aged two years and above on multiple daily injections of insulin (three or more) or who use an insulin pump may now be eligible for public coverage of the Dexcom G6 CGM System via Prince Edward Island’s Diabetes Glucose Sensor Program.

In March, DexCom announced that effective Mar 14, 2022, the Ontario government will provide coverage for the Dexcom G6 CGM System through Ontario’s Assistive Devices Program for people with type 1 diabetes living in the province who are above the age of 2 years and meet coverage criteria.

Strong Q2 Results: DexCom’s solid second-quarter 2022 revenues buoy optimism. Rising volumes across all channels and strong new customer additions contributed to the upside. Impressive contributions from the Sensor segment and domestic and international revenue growth were key catalysts. DexCom also received CE Mark for an updated sensor algorithm, making the latest G7 sensor technology available to international markets.

Downsides

Reimbursement Risk: Reimbursement risk is somewhat high due to the efforts to control healthcare expenses. The company noted that most Type 1 patients (above 65) pay 100% of their CGM costs out of their own pockets. Unless payers (both government and private insurers) provide sufficient coverage and reimbursement, commercial success for DexCom will be limited, in our view.

Stiff Competition: The market for blood glucose monitoring devices is highly competitive, subject to rapid change and significantly affected by new product introductions. DexCom’s competitors manufacture and market products for the single-point finger stick device market and collectively account for substantially all of the worldwide sales of self-monitored glucose testing systems, currently.

Estimate Trend

DexCom is witnessing a negative estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.3% south to 79 cents.

The Zacks Consensus Estimate for the company’s third-quarter 2022 revenues is pegged at $751.3 million, suggesting a 15.5% improvement from the year-ago quarter’s reported number.

Stocks to Consider

Currently, DexCom carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are ShockWave Medical SWAV, AMN Healthcare Services AMN and McKesson MCK. While ShockWave Medical and AMN Healthcare Services sport a Zacks Rank #1 (Strong Buy), McKesson carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for ShockWave Medical’s earnings per share rose from $2.02 to $2.57 for 2022 and from $2.95 to $3.42 for 2023 in the past 60 days. SWAV has gained 54.6% so far this year.

ShockWave Medical delivered an earnings surprise of 180.14%, on average, in the last four quarters.

Estimates for AMN Healthcare Services have improved from earnings of $10.41 to $11.26 for 2022 and $7.94 to $8.30 for 2023 in the past 60 days. AMN stock has declined 13% so far this year.

AMN Healthcare Services delivered an earnings surprise of 15.66%, on average, in the last four quarters.

McKesson’s earnings per share estimates increased from $23.27 to $24.42 for fiscal 2023 and $25.41 to $26.04 for fiscal 2024 in the past 60 days. MCK has gained 37.6% so far this year.

McKesson delivered an earnings surprise of 13.00%, on average, in the last four quarters.


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McKesson Corporation (MCK): Free Stock Analysis Report
 
DexCom, Inc. (DXCM): Free Stock Analysis Report
 
AMN Healthcare Services Inc (AMN): Free Stock Analysis Report
 
ShockWave Medical, Inc. (SWAV): Free Stock Analysis Report
 
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