Raymond James maintains Strong Buy on DexCom with $99 target

Tuesday, DexCom (NASDAQ:DXCM) shares, currently trading at $85.48 with a market capitalization of $33.38 billion, maintained their Strong Buy rating from Raymond (NSE:RYMD) James, with the firm reiterating a $99.00 price target. The endorsement follows DexCom's latest quarterly results, which signaled a positive turn in the company's rebuilding efforts after a challenging second half of 2024. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations. The firm's analysis suggests that DexCom's business is stabilizing, and the Total (EPA:TTEF) Addressable Market (TAM) for its products remains large and under-penetrated.

Last week, analysts from Raymond James met with DexCom's management team, providing insights that contributed to an updated business model reflecting guidance for the fourth quarter of 2025. The Strong Buy rating is based on the anticipation of sustainable mid-teens revenue growth, already evidenced by the company's 16.19% revenue growth in the last twelve months, and potential operating leverage that could lead to faster earnings per share (EPS) growth. InvestingPro data reveals the company's impressive PEG ratio of 0.58, suggesting attractive valuation relative to growth potential.

The fourth quarter of 2024 saw DexCom achieve a record number of new users in the United States for the second consecutive quarter, concluding the year with an estimated 2.8 to 2.9 million worldwide users, marking a 25% year-over-year increase. This growth is supported by the company's strong financial health, earning a "GREAT" overall score of 3.27 on InvestingPro's comprehensive assessment framework. This growth excludes figures from Stelo, a subsidiary or product line not detailed in the context. Revenue growth in the U.S. showed acceleration both year-over-year and on a two-year stacked basis.

Despite these positive developments, DexCom's gross margin (GM) fell short of expectations due to a one-time inventory issue. While this was noted as a negative aspect in the otherwise encouraging quarterly performance, the company maintains a healthy gross profit margin of 61.68% over the last twelve months.

In other recent news, DexCom, a medical device company, has been the focus of several positive analyst notes. Piper Sandler reaffirmed its Overweight rating on DexCom, citing growth potential and new catalysts. Analysts from the firm highlighted DexCom's impressive revenue growth and the company's successful expansion to include reimbursement for 5 million Type 2 diabetes patients not using insulin. This expansion is expected to add 12%-15% to DexCom's worldwide installed base, potentially translating into significant top-line growth.

Citi also reaffirmed a Buy rating on DexCom, focusing on key growth drivers for the franchise, including the anticipated second-half 2025 launch of the 15-day G7 in the United States. DexCom's management expects that within the next 18 to 30 months, all of its continuous glucose monitoring platforms will transition to the 15-day model, enhancing the company's profit margins and market presence.

DexCom recently settled patent disputes with Abbott, signing a cross-license agreement, a significant step towards collaboration in the field of analyte sensing technology. Furthermore, analysts from Piper Sandler, RBC (TSX:RY) Capital Markets, and BofA Securities expressed optimism for DexCom, with Piper Sandler expecting the company to maintain its 15% revenue growth outlook for 2025.

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