Markets

Dexcom's Q3 Revenue Forecast Impressive, Stock Rallies

Credit: Shutterstock photo

Shares of DexCom Inc. DXCM surged 19.4% ($13.70) to close at $84.35 on Oct 15, after the company announced an encouraging revenue forecast for the third quarter of 2015 that ended on Sep 30. The company is set to report third-quarter results on Nov 4.

DexCom expects revenues to rise an impressive 52% on a year-over-year basis to $105 million, much higher than the current Zacks Consensus Estimate of $98 million. The Zacks Consensus Estimate for earnings is currently pegged at a breakeven for the quarter.

DexCom is riding high on the back of its healthy product portfolio and innovative pipeline. We note that the company enjoys a strong market presence, thanks to G4 PLATINUM System, which is the industry's first mobile connected continuous glucose monitoring (CGM) system.

Meanwhile, DexCom's CGM and mobile apps - Share 2 and Follow - are approved by the FDA and allow both users and followers to view glucose data directly on Android and iOS-enabled devices.

In late August, the FDA approved the G5 Mobile CGM System of the company. The fully portable product is the first and solitary CGM system permitted by the FDA for use in both adults and children above two years of age. The transmitter, with in-built Bluetooth, sends essential glucose information directly to an app on iOS-enabled devices for instantaneous diabetes supervision. The company intends to launch the app for android devices in early 2016.

The company has already started shipping the device. It is also well on track to conduct a pre-pivotal study with its gen 6 sensors later this year. Following that, the company will look to commence a pivotal study. Meanwhile, DexCom expects to launch gen 6 in early 2017.

Apart from innovative product launches, strategic partnerships with the likes of Apple and Google, which boast a vast global presence, are expected to boost DexCom's business scale massively. In August, the company entered into a partnership with Google's life sciences team to develop a series of CGM devices that will be compact ("bandage-sized sensor"), easy to use and more economic than the existing products. The devices will be disposable and can be used by all types of diabetes patients.

As technology is becoming a more relevant and indispensable part of people's lives, we feel that the Google collaboration will go a long way in enhancing the brand value of DexCom's products and services. The combination of Google's miniaturized electronics platform with DexCom's superior sensor technology is expected to develop CGMs that will help patients manage diabetes better.

Moreover, by expanding its range of solutions and services, DexCom improves its international presence that will enhance top-line growth.

However, high product development costs, research & development as well as marketing expenses will continue to hurt margins, which is a concern for the near term. Uncertainty over reimbursement also remains a headwind in our view.

Zacks Rank & Key Picks

Currently, DexCom carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the medical sector include Masimo MASI , Mazor Robotics MZOR and Cyberonics CYBX . All the three stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

DEXCOM INC (DXCM): Free Stock Analysis Report

MASIMO CORP (MASI): Free Stock Analysis Report

CYBERONICS INC (CYBX): Free Stock Analysis Report

MAZOR ROBOTICS (MZOR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

DXCMMASI

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More