Dexcom Drops 9% As Revenue Beat Fails To Impress Investors

Shares in Dexcom (DXCM) dropped 9% on Tuesday after the medical device company pre-announced revenue of $500.9M. This represented 26.4% year-over-year growth, and beat Street estimates by $18.71M.

“The top line beat was smaller than the massive beats we’d grown accustomed to seeing from DXCM, which has reported an average ~$40M quarterly beat over the past year” BTIG analyst Marie Thibault wrote on October 26. “With shares priced for perfection into the report, we would not be surprised by some stock weakness Tuesday” she commented.

Dexcom subsequently released its full earning results in Tuesday’s after-market, sending shares down a further 0.6%. Third quarter Non-GAAP EPS of $0.94 beat Street expectations by $0.28 while GAAP EPS of $0.73 also beat by $0.27.

The company also raised its  2020 sales guidance to $1.9B (+29%), up $150M from initial guidance mid-point despite Covid-19 and greater net-price headwind. Non-GAAP Gross profit margin is expected to meet or exceed 66% with Non-GAAP Operating margin of 16%+.

“The third quarter was another strong period of growth for Dexcom as awareness of our technology continues to grow in this time of heightened focus on glycemic health,” said Kevin Sayer, Dexcom’s CEO. “We are once again pleased to raise our full-year 2020 guidance as our teams press forward to close the year strong and execute on our strategic initiatives.”

Overall, the Street has a cautiously optimistic Moderate Buy consensus on Dexcom with 12 recent buy ratings vs 3 hold ratings and 1 sell rating. The average analyst price target of $467 indicates 23% upside potential lies ahead. Shares have surged 74% on a year-to-date basis.

BTIG’s Marie Thibault has a hold rating on the stock without a price target, arguing that the current multiple on an NTM EV/Sales basis is expensive given the potential for negative macroeconomic dynamics, competition, and pricing pressure. (See DXCM stock analysis on TipRanks).

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