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On Wednesday, Mizuho (NYSE:MFG) Securities initiated coverage of DexCom (NASDAQ:DXCM), a medical device company specializing in continuous glucose monitoring (CGM) systems, with an Outperform rating. The firm also set a price target of $85.00 for the company's shares, representing potential upside from the current price of $66.78. With a market capitalization of $26.09 billion, DexCom has demonstrated strong market presence, achieving 11.34% revenue growth in the past year. The positive outlook is based on recent survey data indicating robust adoption rates for CGM technology, as well as favorable reactions from physicians regarding DexCom's latest products.
The Mizuho analyst highlighted that their Outperform rating is grounded on the potential growth of CGM usage and the successful reception of DexCom's flagship G7 sensor. The G7 device is specifically designed to appeal to a broad range of individuals with Type 2 diabetes. A survey of 50 physicians projected that the U.S. market for CGM will grow by more than 20% over the next two years, with the G7 sensor expected to capture a significant portion of the market share. According to InvestingPro data, DexCom maintains a healthy gross profit margin of 60.46% and generates annual revenue of $4.03 billion, positioning it well to capitalize on this market expansion.
In addition to the G7 sensor, DexCom's consumer CGM offering, Stelo, is also poised to make an impact. According to a survey of 800 participants, there is a strong demand for Stelo among the nearly 97 million pre-diabetic individuals in the U.S., which could lead to further market expansion for DexCom.
The $85.00 price target set by Mizuho represents a 35% potential upside from current levels. This target takes into account broader market risks and is a discount to DexCom's three-year historical average valuations. Mizuho also outlined a more optimistic scenario, with a bull case price target of $100.00, which assumes a faster stabilization of the G7 sensor in the market and a wider adoption of the Stelo product.
DexCom's advancements in the CGM field and their strategic positioning to capture a significant portion of the diabetic and pre-diabetic populations suggest a promising trajectory for the company's stock value. InvestingPro analysis indicates that DexCom is currently undervalued, with a "GREAT" overall financial health score. For deeper insights into DexCom's valuation and growth potential, including exclusive ProTips and comprehensive financial analysis, check out the detailed Pro Research Report available on InvestingPro, covering over 1,400 top US stocks.
In other recent news, DexCom has announced significant developments that may interest investors. The company has appointed Deloitte & Touche LLP as its new independent auditor for the fiscal year ending December 31, 2025, replacing Ernst & Young LLP. This change was made without any disagreements over accounting principles or audit scope. Additionally, DexCom has named Jon Coleman as the new chief commercial officer, bringing his extensive experience in global healthcare leadership to the company.
Furthermore, Renée Galá has joined DexCom's Board of Directors, bringing her expertise in financial and strategic leadership from her role at Jazz Pharmaceuticals (NASDAQ:JAZZ). Citi and BTIG have both maintained their Buy ratings for DexCom, despite a recent FDA warning letter. The FDA identified violations in DexCom's manufacturing processes, but analysts and company management do not expect this to impact the company's financial guidance or product approvals.
DexCom has taken corrective actions to address the FDA's concerns and plans to submit a written response within the required timeframe. The FDA warning is not expected to restrict DexCom's production or marketing activities, nor will it hinder the approval process for its upcoming 15-day sensor. Investors are advised to stay informed as DexCom works to resolve these regulatory issues.
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