Down More Than 50%, Is DexCom Stock a Bargain Now?

DexCom Stock Performance and Market Position - DexCom stock is down by about 53% from its peak in April, despite starting the year with healthy gains [1] - The company markets one of the world's most popular continuous glucose monitors (CGM), which transmit data to smartphones or Apple Watches [1] - DexCom's stock fell by about 40% in July after management lowered its sales guidance, with Q3 sales growth expected to be only 1% to 3% year over year [2] - Full-year revenue expectations were revised down to $4 billion to $4.05 billion, from a previous range of $4.2 billion to $4.35 billion [2] Competitive Landscape - Abbott Laboratories, DexCom's lead competitor, did not issue a similar sales slowdown warning, raising investor concerns [2] - Abbott's FreeStyle Libre CGM sales grew 18.4% year over year in Q2 to $1.6 billion, about 60% more than DexCom's CGM revenue in the same period [3] - Medtronic, another major player, received FDA approval for its first disposable all-in-one CGM in August, intensifying competition [6] - Abbott and Medtronic announced a collaboration combining Abbott's CGM technology with Medtronic's insulin delivery system, potentially strengthening Abbott's market position [7] Market Opportunity and Product Innovation - DexCom's addressable market is large, with 29.4 million diagnosed diabetic adults in the U.S. and an estimated 8.7 million undiagnosed cases [4] - Approximately 38% of U.S. adults have prediabetes, creating additional demand for glucose monitoring [4] - DexCom launched Stelo, an over-the-counter CGM for non-insulin users, in August to tap into the growing market of health-conscious individuals [4] Challenges and Risks - DexCom's forward price-to-earnings ratio of 39.8 is high, suggesting the stock could fall further if the Q3 sales slowdown persists [5] - Eli Lilly's tirzepatide study showed a 94% reduction in the risk of progression to type 2 diabetes, potentially shrinking DexCom's addressable market [6] - DexCom's stock is not considered a bargain at its current valuation, and investors may need to wait for a return to previous growth rates [8]