Dexcom, a company known for its diabetes management tools, saw its stock plummet by more than 40% on Friday following a disappointing second-quarter earnings report. This drop, the steepest in the company’s history, erased over $17 billion in market capitalization, with shares falling $43.85 to close at $64.
The company’s revenue for the quarter increased by 15%, reaching $1 billion, but fell short of the $1.04 billion expected by analysts. The bigger concern, however, was the company’s updated forecast. Dexcom now expects third-quarter revenue to range from $975 million to $1 billion, down from its previous estimate of $4.20 billion to $4.35 billion for the full year.
CEO Kevin Sayer attributed the lower revenue forecast to several factors, including a restructuring of the company’s sales team, fewer new customers than expected, and lower revenue per user. He also mentioned challenges in the durable medical equipment (DME) channel and issues related to rebates for their new CGM device, the G7. Sayer emphasized the need to refocus on relationships with DME distributors, acknowledging that the company had not executed well in this area.
JPMorgan analysts downgraded Dexcom’s stock from a buy to a hold, citing internal issues as the main reason for the disappointing performance. They expressed concern about the extent of the impact from the sales force restructuring and the company’s challenges in the DME channel.
Despite the sharp decline, some analysts, including those from William Blair and Leerink, believe the long-term outlook for Dexcom remains positive. They argue that the current issues are likely to be temporary and do not significantly alter the company’s growth potential.
Dexcom is set to launch its new over-the-counter CGM, Stelo, in August, which is designed for Type 2 diabetes patients who do not use insulin. As the company navigates these challenges, investors and analysts alike will be watching closely to see if Dexcom can recover and return to a growth trajectory.
