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On Friday, Bernstein SocGen Group maintained its Outperform rating on DexCom shares (NASDAQ:DXCM), with a price target of $100. Currently trading at $65.40, the company has shown significant momentum with a 12.5% return over the past week, according to InvestingPro data. The firm acknowledged the recent FDA approval of DexCom's G7 15 Day as a significant achievement for both the company and its users. The new product extends sensor wear time from 10.5 days to 15.5 days, reducing the frequency of sensor changes and associated waste.
The approval is seen as a competitive move, aligning DexCom's G7 with the Libre 3's 15-day wear time. With an impressive gross margin of 60.46% and revenue growth of 11.34% in the last twelve months, DexCom demonstrates strong fundamentals. Bernstein highlighted the approval's potential to drive further margin expansion, as it will ship fewer sensors without a reduction in revenue. Despite the challenging environment for high-multiple stocks with tariff exposure, Bernstein remains optimistic about DexCom's fundamentals, supported by the company's GREAT financial health score from InvestingPro.
The firm pointed out that DexCom's current trading at 5.7 times next twelve months (NTM) sales is considerably below its roughly 7.5 times average over the past four years. Bernstein views this as an attractive risk/reward scenario for investors. The expansion of U.S. Continuous Glucose Monitoring (CGM) coverage to more than 25 million Type 2 diabetes non-insulin users is identified as a potential major catalyst for DexCom in the coming years.
Bernstein's price target of $100 is based on a price-to-sales (P/S) multiple of 7.5 times against their fiscal year 2026 sales estimates of $5.33 billion. This target P/S multiple remains below the 10 times or higher levels at which DexCom stock traded before it fell short of expectations in the second quarter of 2024. For a detailed analysis, Bernstein refers to their fourth-quarter 2024 earnings recap.
In other recent news, DexCom has announced the FDA clearance of its 15-day G7 Continuous Glucose Monitoring (CGM) system for adults with diabetes. This approval is notable as it follows an FDA warning letter that had previously raised concerns about potential delays. The new sensor, which matches and surpasses competitors with a 15.5-day lifespan, is expected to launch in the second half of 2025. Analysts from Canaccord, Raymond (NSE:RYMD) James, BTIG, and Stifel have maintained positive ratings on DexCom's stock, with price targets ranging from $99 to $120. The clearance is seen as a positive development for the company, potentially boosting revenue and improving gross margins due to reduced production costs compared to the 10-day sensor.
The 15-day G7 system features enhanced accuracy, waterproof design, and compatibility with the Apple (NASDAQ:AAPL) Watch, offering a more streamlined user experience. DexCom's management has highlighted the system's potential to reduce the number of sensors required per month, which could lead to margin benefits. Analysts anticipate that the longer wear time and cost efficiencies could significantly impact DexCom's financial performance, with expectations for improved gross margins in the coming years. The company is also focusing on ensuring the sensor's compatibility with insulin pumps and establishing comprehensive reimbursement channels.
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