EU and US could reach trade deal this weekend - Reuters
On Thursday, Raymond (NSE:RYMD) James reiterated a Strong Buy rating and a $99.00 price target for DexCom shares (NASDAQ:DXCM), following the FDA clearance of its 15-day G7 sensor. The analyst noted that the clearance aligns with prior expectations and should bolster confidence in the company's management. The new sensor, approved for individuals aged 18 and over, is expected to launch in the second half of 2025 with pump compatibility. The company, currently generating $4 billion in annual revenue with a healthy 60.5% gross margin, has demonstrated strong execution. InvestingPro data shows the company maintains a GREAT financial health score, with 13 additional ProTips available to subscribers.
The analyst highlighted that the FDA's approval addresses recent investor concerns regarding potential delays in the G7 15-day sensor's timeline. These concerns were exacerbated by the issuance of an FDA warning letter, which cast doubt on the sensor's clearance. Despite initial expectations for pediatric inclusion, the sensor has been cleared only for adult use. However, DexCom is reportedly enhancing its 10-day device to better serve the pediatric market. The stock has shown recent momentum, gaining 8.2% in the past week, though trading at a relatively high P/E ratio of 48x. According to InvestingPro's Fair Value analysis, the stock appears slightly undervalued at current levels.
The approval of the 15-day sensor is seen as a competitive move against Abbott's Libre sensors, which have a similar lifespan. Although sensor lifespan is not the primary factor in patient choice, the extended duration removes a potential reason for choosing Libre over G7. The analyst anticipates that the 15-day sensor will have a modest positive impact on DexCom's revenue, which has already grown 11.3% over the last twelve months. Get deeper insights into DexCom's competitive positioning and growth prospects with the comprehensive Pro Research Report, available exclusively on InvestingPro.
More significantly, the 15-day sensor is expected to boost DexCom's gross margins, as it costs the same to produce as the 10-day sensor. The analyst's calculations suggest that the new sensor could increase gross margins by over 10% in the coming years, provided there are no significant price changes. This improvement is particularly relevant as it could help offset potential price erosions.
Background information provided indicates that DexCom's current G6 and G7 sensors have a 10-day lifespan. Last month, DexCom presented promising data on the 15-day sensor at the Advanced Technologies & Treatments for Diabetes (ATTD) conference, demonstrating an overall mean absolute relative difference (MARD) of 8.0%, which is more accurate than the 10-day version of the G7 sensor.
In other recent news, DexCom has received FDA clearance for its 15-day G7 Continuous Glucose Monitoring (CGM) system, which is expected to launch in the second half of 2025. The G7 sensor, noted for its 8.0% Mean Absolute Relative Difference (MARD), is being introduced as the longest-lasting and most accurate CGM system for adults with diabetes. Analysts from BTIG and Stifel have maintained their Buy ratings on DexCom, with price targets set at $120.00 and $100.00, respectively. Both firms highlighted the significance of the FDA approval in addressing prior concerns and its potential positive impact on DexCom's financial outlook. Mizuho (NYSE:MFG) has also initiated coverage of DexCom with an Outperform rating and an $85.00 price target, emphasizing strong adoption rates for the G7 sensor. The transition to the 15-day sensor is expected to reduce the Cost of Goods Sold by approximately 33%, with financial benefits anticipated to become more apparent by FY26. DexCom's strategic collaboration with insulin pump partners aims to enhance the G7 system's integration with automated insulin delivery systems. The company is also working to ensure comprehensive reimbursement through pharmacy and Durable Medical (TASE:BLWV) Equipment channels.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.