Dexcom's Stock Has Taken A Huge Hit - It Could Be Time To Be Greedy

Mar. 19, 2020 8:06 AM ETDexCom, Inc. (DXCM)11 Comments


  • Dexcom stock has been in freefall - the company's shares dropped by 20% on Monday and have lost nearly 50% of their value during the past month.
  • Prior to the COVID-19 crisis Dexcom's share price had increased by 100% in 3 months as the company smashed growth targets and looked set to grow sales exponentially.
  • Stocks associated with diabetes treatment have been badly hit and recovery has lagged the market - but it is now happening.
  • Dexcom says that its operations will not be affected by the coronavirus. If the investment case has not changed then it could be time to "be greedy".

Investment Thesis

Dexcom's (NASDAQ:DXCM) share price has fallen from a high of $303 to a low of $191 in less than one month. Even by COVID-19 standards, that is enough to give investors a sinking feeling. Yet the company has issued a statement stating that its operations have not been affected by the pandemic, and fundamentally, this is the same company that investors have been backing to the hilt on its impressive financial performance and the strong promise of its products.

Dexcom COVID-19 statement. Source: company website.

For those prepared to be brave there is a potential buying opportunity here. Before taking the plunge, however, it is worth performing a risk assessment of the company and looking out for any obvious red flags. In this article I will try to do that, and present a final recommendation as to whether I believe Dexcom is a "buy now" or a busted flush.

Overview and background

Until the beginning of this month (March) Dexcom - company and stock - had enjoyed a phenomenal 12 months.

The highlights reel for this manufacturer and distributor of integrated continuous glucose monitoring devices ("iCGMs") for use by people with diabetes included year-on-year sales growth of 44% and 43% in 2018 and 2019 respectively, becoming profitable for the first time (in 2019) and outperforming on revenues and EPS estimates across all 4 quarters of last year.

As such Dexcom stock grew from a price of $121 in June last year to an all-time high of $303 at the end of February this year - a 150% jump. The PE ratio at this price was ~274x, but - as I have argued before - this was justified by Dexcom's innovative medical devices and the large and under-penetrated market they address.

The past month has not been kind to

This article was written by

Edmund Ingham profile picture
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I write about Biotech, Pharma and Healthcare stocks and share investment tips. Find me at my marketplace channel, Haggerston BioHealth - model portfolio + 4 exclusive stock tips every week. I'm on twitter @edmundingham

Disclosure: I am/we are long DXCM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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