Shares of DexCom (NASDAQ: DXCM) were crashing 39.9% lower as of 10:20 a.m. ET on Friday. The huge sell-off came after the continuous glucose monitoring (CGM) systems maker announced its second-quarter results following the market close on Thursday.
DexCom’s revenue increased 15% year over year in Q2 to $1 billion. However, that came in a little below the average revenue estimate of $1.04 billion based on LSEG‘s survey of analysts.
The company posted Q2 earnings of $143.5 million, or $0.35 per share, based on generally accepted accounting principles (GAAP). Its non-GAAP earnings came in at $174.3 million, or $0.43 per share. This reflected solid year-over-year growth and beat the consensus Wall Street adjusted earnings estimate of $0.39 per share.
The worst part of DexCom’s Q2 update was that the company lowered its full-year 2024 guidance. DexCom now expects full-year revenue of between $4 billion and $4.05 billion. It previously forecast revenue of $4.2 billion to $4.35 billion.
What’s going on? DexCom lost market share in the durable medical equipment (DME) channel. CEO Kevin Sayer also said in the Q2 earnings call, “We’re short a large number of new patients as to where we thought we would be at this point in time.” His comment raised concerns that DexCom was feeling the impact of GLP-1 drugs that help patients control their diabetes and lose weight.
With DexCom’s massive decline today, you’d think the sky was falling for the company. That doesn’t appear to be the case. However, this stock still trades at a sky-high forward earnings multiple. I think investors’ best move is to remain on the sidelines until DexCom can prove its growth will continue to justify such a steep valuation.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.
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