- More than $15 billion wiped off market cap
- Healthcare firm posted Q2 miss and cut Q3 guidance
- Stock seen rallying to $145, according to analysts
Healthcare kit maker DexCom (DXCM:NASDAQ) saw $15 billion swiped from its market value overnight after the company posted a big second quarter miss and slashed its Q3 guidance.
Previously valued at more than $42 billion, the San Diego, California-based firm saw its stock price plunge 37% in after-hours trading, leaving the market valuation at barely $27 billion.
UK investors may not be familiar with DexCom but if you know anyone who suffers with diabetes, there’s a good chance they use DexCom equipment to continuously monitor their glucose levels.
WHAT DID THE COMPANY SAY?
DexCom now expects revenue of between $4 billion to $4.05 billion for fiscal 2024, down from prior guidance of $4.2 billion to $4.35 billion. The company reported Q2 earnings $0.43 per share on revenue of $1 billion, compared with estimates of $0.39 on revenue of $1.04 billion.
For Q3, revenue was guided in a range of $975 million to $1 billion, missing analyst estimates of $1.15 billion.
‘While Dexcom advanced several key strategic initiatives in the second quarter, our execution did not meet our high standards’, the company said.
‘There’s no getting away from the fact that this Thursday’s (25 Jul) update was a sharp turn in the wrong direction for Dexcom’, JPMorgan analysts said in a note. ‘We expect shares will struggle to outperform as it navigates these near-term challenges and works to rebuild investor trust’, analysts added, downgrading the stock from Overweight to Neutral and nearly halving the price target from $145 to $75.
NEAR-TERM ISSUES CAN BE OVERCOME
But JPMorgan was eager to point out the likely short-term nature of DexCom’s current issues. ‘While we still walked away from earnings with some unanswered questions, we feel very confident that this is due to multiple self-inflicted issues rather than a market growth issue. The TAM (total addressable market) is substantial, and the opportunity remains for the long-term’, the analysts said.
According to data from UK diabetes community website Diabetes.co.uk, more than 3.5 million people in England and Wales suffer with diabetes, while it is estimated that 415 million people worldwide live with the condition, or about one in every 11.
The figure is expected to rise to 642 million people living with diabetes worldwide by 2040.
Comments from RBC analysts were even more upbeat. While acknowledging that the execution miss was ‘disappointing’, the investment bank believes the near 40% sell-off in the stock ‘is unjustified’.
RBC trimmed its target price from $165 to $145, implying double-your-money potential on the implied $68.49 of pre-market data.
