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On Friday, Canaccord Genuity maintained a positive outlook on DexCom (NASDAQ:DXCM), raising the price target for the company’s stock to $106 from the previous $103, while keeping a Buy rating. This adjustment comes in the wake of DexCom’s first-quarter performance, which surpassed revenue expectations in the United States but fell slightly short overseas. Despite this, the company demonstrated robust organic growth outside the United States. According to InvestingPro data, DexCom has maintained strong revenue growth of 11.3% over the last twelve months, though the stock is currently trading at a premium valuation with a P/E ratio of 48.5x.
DexCom’s quarterly results were highlighted by a strong showing in U.S. sales, which, according to Canaccord Genuity, indicates that the company has resolved past issues with its salesforce realignment. The firm also noted that DexCom is poised to further tap into the Type 2 non-insulin market, given its expansive network of over 100,000 prescribing physicians and coverage expansion to approximately 6 million of the 25 million U.S. lives, with a third major commercial payor expected to come on board in the second half of 2025. InvestingPro analysis reveals the company’s solid financial health, with a strong gross profit margin of 60.5% and sufficient cash flows to cover its moderate debt levels.
The company’s confidence in its financial model is reflected in the reiterated guidance for adjusted operating margin (OM) and adjusted EBITDA for 2025. This outlook remains positive despite the projected 200-300 basis points impact on gross margin guidance, which is attributed to inventory and supply chain challenges. With an EBITDA of $817.7 million in the last twelve months and analysts forecasting continued profitability, DexCom maintains a "GREAT" overall financial health score according to InvestingPro’s comprehensive analysis, which includes 12 additional key insights available to subscribers.
Canaccord Genuity’s enthusiasm is further bolstered by DexCom’s diversified product portfolio, which includes the 15-day G7 sensor for prescription use and the Stelo sensor for over-the-counter sales. This two-tier strategy is expected to appeal to both prescribers and patients, potentially leading to significant gross margin improvements in the coming years. This is due in part to the per diem reimbursement model benefiting longer-wear sensors.
The firm is particularly optimistic about the opportunities in the Type 2 non-insulin using patient segment, which is estimated to be roughly five times larger than the combined market for Type 1 and insulin-using Type 2 patients. Canaccord Genuity’s updated price target reflects their confidence in DexCom’s strategy and market potential.
In other recent news, DexCom reported first-quarter revenue of $1.04 billion, surpassing analyst estimates of $1.02 billion. This marks a 12% increase year-over-year on a reported basis and a 14% increase on an organic basis. Despite this strong revenue performance, the adjusted earnings per share (EPS) came in at $0.32, slightly below the expected $0.33. BTIG analyst Marie Thibault responded by raising the price target for DexCom shares to $109 from $107, maintaining a Buy rating, citing the company’s return to prior performance levels. Meanwhile, Bernstein adjusted its price target for DexCom to $88 from $100, maintaining an Outperform rating. The revision reflects a more conservative price-to-sales multiple due to potential risks, including competition and supply chain issues. DexCom’s U.S. revenue saw a 15% year-over-year increase, while international revenue grew 12% organically, although it did not meet expectations. The company reiterated its full fiscal year 2025 revenue guidance of $4.60 billion and announced a $750 million share repurchase program. DexCom also updated its non-GAAP gross profit margin guidance to approximately 62% for the year, citing incremental costs related to supply dynamics.
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