Shares of DexCom Inc. DXCM rallied to a new 52-week high of $71.73 on May 27, eventually closing a tad bit lower at $71.64. This represents a strong one-year return of about 108.1%. The S&P 500 also jumped almost 10.6% during the same period.
We note that this Zacks Rank #3 (Hold) stock has a market cap of $5.44 billion and a long-term expected EPS growth rate of 32.5%.
Key Growth Catalysts
DexCom reported loss in the first quarter of 2015 primarily owing to higher operating expenses. The reported net loss of 17 cents per share was wider than the Zacks Consensus Estimate of a loss of 10 cents per share.
However, the company’s top-line growth was encouraging. Revenues surged nearly 55% year over year and totaled $72.8 million, marginally higher than the Zacks Consensus Estimate of $72 million. The upside was driven by an impressive 56% jump in product revenues. New patient growth on a year-over-year basis exceeded revenue growth in the first quarter.
The latest launch of DexCom Share – the first FDA-approved mobile remote monitoring system – and the new software for its G4 Platinum CGM system will continue to drive top-line growth for the rest of 2015.
DexCom has a robust pipeline that comprises the upcoming G5 mobile system (expected to be launched in late 2015), next generation G6 system (scheduled to launch in the first half of 2017), insulin dose plan for current system (under consideration with FDA) and insertion system. However, higher product development costs, research & development (R&D) and marketing expenses will continue to hurt margins in the near term.
DexCom continues to expect product revenues in the range of $340 million to $360 million for 2015. Approximately 40% to 45% of this revenue is expected to be generated in the first half, while the remaining is likely to come in the back half, much similar to the 2014 trend.
Estimate Revisions
The Zacks Consensus Estimate for 2015 currently stands at a loss of 2 cents per share, which has remained steady over the past 7 days. Similarly, the consensus estimate for fiscal 2016 has remained steady at 45 cents over the same period.
Stocks to Consider
Better-ranked stocks in the sector are LDR Holding LDRH, Globus Medical GMED and Masimo MASI. While LDR Holding sports a Zacks Rank #1 (Strong Buy), Globus Medical and Masimo carry a Zacks Rank #2 (Buy).
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