Analyst Cautiously Optimistic On DexCom As Competitive Pressures Loom

On Thursday, Dexcom, Inc.'s DXCM fourth-quarter revenue rose 8% year-over-year to $1.114 billion, beating the analyst consensus estimate of $1.104 billion.

U.S. revenue rose by 4%, while international revenue rose by 17% on a reported basis and 19% on an organic basis.

Outlook: Dexcom reaffirmed its FY25 guidance for revenue of $4.60 billion (vs. cons. of $4.61 billion), adjusted gross profit margin of around 64%–65%, and adjusted operating margin of 21%.

In December, Abbott Inc. ABT reached an agreement with DexCom to settle all outstanding patent disputes related to continuous glucose monitoring products.

The agreement will dismiss all pending cases in courts and patent offices worldwide. It also includes a provision that the parties will not litigate patent, trade dress, and design rights disputes with each other for the next 10 years. No financial payments are associated with the settlement from Abbott or Dexcom.

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Analyst Reactions: William Blair writes that DME's market share remained steady in Q4, and productivity has improved as planned, following a 40% commercial team expansion last year.

The analyst says the management expects further gains in productivity and another record year for new patient additions in 2025.

While the benefits of these improvements will take several quarters to materialize, especially as 2024 execution challenges fade in the second half, analyst Margaret Kaczor Andrew sees multiple growth drivers that could boost performance in 2025 and sustain revenue and earnings growth in the long term.

Andrew said that DexCom's challenges in 2024 may be temporary. She notes that DexCom is positioned for long-term growth, supported by its expanding product lineup, including G7, Dexcom One, and Stelo, and opportunities to reach new patient groups.

However, the analyst points out that DexCom's growth depends on adding new patients, particularly those with early-stage diabetes, with limited clinical data and reimbursement support.

Competition from major players like Medtronic Plc MDT and Abbott Inc ABT could also impact DexCom's expansion by capturing a share of new or existing patients in the continuous glucose monitoring market.

Morgan Stanley analyst Patrick Wood maintains DexCom with an Equal-Weight rating and raises the price target from $75 to $82.

Canaccord Genuity analyst William Plovanic maintains DexCom with a Buy and raises the price target from $99 to $103.

Price Action: DXCM stock is up 6.22% at $89.32 at last check Friday.

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