On Friday, Piper Sandler adjusted its outlook on DexCom (NASDAQ:DXCM), a medical device company, by reducing the price target to $90 from the previous $150 while maintaining an Overweight rating on the stock.
The adjustment came after the company reported its second-quarter earnings for 2024, which showed weaker than expected revenue but stronger earnings at the bottom line.
DexCom's revenue shortfall was attributed to various factors including disruptions in the sales force, a decrease in durable medical equipment (DME) market share, and changes in rebate pricing within the pharmacy channel.
The analyst from Piper Sandler noted that the rebate pricing dynamics and channel mix issues are likely accelerations of challenges that DexCom would have otherwise faced over multiple quarters.
The company's loss of market share in the DME segment was highlighted as a significant concern, with the analyst mentioning that DexCom is evidently losing ground in what was referred to as the "basal wars."
Additionally, the company's international performance was reported to be lagging. Despite these issues, the analyst expressed confidence that DexCom has the potential to resolve these problems through better execution.
Looking ahead, the analyst anticipates that DexCom's shares might experience a downturn as the market adjusts its expectations to view the company as a lower-teens revenue grower. However, the firm holds a belief that DexCom could achieve mid-teens revenue growth in the future, with an even higher growth rate for earnings per share (EPS).
In light of the after-hours trading indications, which suggested a potential opening price in the mid- to upper $60s range, the analyst recommended aggressive buying of DexCom's stock if it opens around the 19 times 2025 estimated EBITDA.
In other recent news, DexCom, a medical device company, reported a second-quarter revenue shortfall, with earnings of $1,004 million, a 15.3% year-over-year increase, but below the anticipated $1,049 million. DexCom's adjusted earnings per share (EPS) of $0.43 surpassed both the $0.40 estimate and the consensus of $0.39.
In response to the earnings report, RBC (TSX:RY) Capital, UBS, and Canaccord Genuity (TSX:CF) have all adjusted their price targets for DexCom, while maintaining positive ratings on the stock.
These recent developments follow DexCom's announcement of a decrease in U.S. revenue per customer and lower-than-expected new customer starts. The company has revised its full-year revenue guidance to 11% to 13% organic growth and its revenue expectations to $4.00 billion to $4.05 billion.
Despite these challenges, DexCom has initiated a share repurchase program of up to $750 million and plans to launch its Stelo product to enhance its competitive position.
Analysts from RBC Capital, UBS, and Canaccord Genuity remain optimistic about DexCom's long-term prospects, expecting the company to overcome its second-quarter performance issues and maintain strong growth rates. The analysts believe that the current weaknesses in the stock present a buying opportunity, given DexCom's high quality and clear strategies for overcoming the recent hurdles.
InvestingPro Insights
In the context of DexCom's (NASDAQ:DXCM) recent earnings report and Piper Sandler's updated outlook, it's worth considering additional insights from InvestingPro. DexCom's management has been actively buying back shares, reflecting confidence in the company's value. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, which suggests that the stock may be undervalized considering its earnings potential.
From a financial standpoint, DexCom boasts a robust market capitalization of $43.22 billion and has shown impressive revenue growth of 25.78% in the last twelve months as of Q1 2024. The company's gross profit margin stands at a healthy 62.82%, indicating strong operational efficiency. Moreover, with a PEG ratio of 0.58, investors might find the company's stock growth prospects attractive relative to its earnings growth.
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