DexCom (DXCM) Hits 52-Week High: What's Driving the Stock?

Shares of DexCom, Inc. DXCM scaled a new 52-week high of $142.00 on Mar 26, before closing the session marginally lower at $139.93.

Over the past year, this Zacks Rank #2 (Buy) stock has gained 20.6% compared with an 8.8% rise of the industry and the S&P 500’s 31% growth.

Over the past five years, the company registered earnings growth of 61.1% compared with the industry’s 8.5% rise. The company’s long-term expected growth rate of 33.1% compares favorably with the industry’s growth projection of 14.2%. DexCom’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 32.8%.

DexCom is witnessing an upward trend in its stock price, prompted by its strong product portfolio. The optimism led by a solid fourth-quarter 2023 performance and a few positive coverages are expected to contribute further. However, stiff competition and supply constraints persist.

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Let’s delve deeper.

Key Growth Drivers

Strong Product Portfolio: DexCom is expected to continue to benefit from its solid product suite, raising investors’ optimism. This month, the company announced that the FDA has cleared Stelo by Dexcom for use without a prescription.

Last month, DexCom launched its latest continuous glucose monitoring (CGM) system, Dexcom ONE+, which was made available in Spain, Belgium and Poland and was planned to be launched in the Netherlands within February.

Coverages: Investors are optimistic about DexCom’s products, which have been receiving increasing coverage over the past few months. The company’s G7 CGM System is already covered by all major pharmacy benefit managers in the United States following its launch late last year.

As of Dec 31, 2023, the eight largest private third-party payors, in terms of the number of covered lives, have issued coverage policies for the category of CGM devices. The company has also negotiated contracted rates with all these third-party payors for the purchase of its current CGM systems by their members.

Strong Q4 Results: DexCom’s impressive fourth-quarter 2023 results buoy optimism. The company’s strong overall revenues and geographical performances were encouraging. During the quarter, DXCM submitted its direct-to-watch feature, which will enable customers to use a smartwatch as their primary receiver, to the FDA for review.

Downsides

Supply Constraints: The scaling of DexCom’s manufacturing capacity is subject to various risks and uncertainties. It may lead to variability in product quality or reliability, increased construction timelines, as well as a rise in resources required to design, install and maintain manufacturing equipment, among others, all of which can lead to unexpected delays in manufacturing output.

Stiff Competition: The market for glucose monitoring devices is intensely competitive, subject to rapid change, and significantly affected by new product introductions and other market activities of industry participants. Several companies are developing or commercializing products for continuous or periodic monitoring of glucose levels in the interstitial fluid under the skin that compete directly with the company’s products.

Other Key Picks

A few other top-ranked stocks in the broader medical space are DaVita Inc. DVA, Cardinal Health, Inc. CAH and Cencora, Inc. COR.

DaVita, sporting a Zacks Rank #1 at present (Strong Buy), has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 75.3% compared with the industry’s 21.8% rise in the past year.

Cardinal Health, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.

Cardinal Health has gained 56.7% compared with the industry’s 15.4% rise in the past year.

Cencora, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 9.8%. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.7%.

Cencora’s shares have rallied 54.9% compared with the industry’s 5.8% rise in the past year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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