Dexcom is Friday's IBD Stock Of The Day. Shares are bounding off the 50-day line after the diabetes devices giant beat already bullish fourth-quarter expectations.
The beat comes as Dexcom's newest continuous glucose monitor, or CGM, gains steam in the U.S. and Europe. These body-worn devices keep track of blood sugar in real time. The Food and Drug Administration cleared Dexcom's new device, G7, last year.
Commercial insurance companies are signing off on G7 coverage quicker than Dexcom anticipated, BTIG analyst Marie Thibault said in a report. As a result, Dexcom now expects just a $15 million headwind this year from its patient assistance program, vs. prior estimates for $30 million.
"Commentary sounded upbeat on G7 adoption," she said.
On today's stock market, Dexcom stock shot up 9.9% to close at 117.89.
Dexcom Stock: Earnings Reversal
During the December quarter, adjusted Dexcom earnings flipped from a year-earlier loss to 34 cents per share. That also beat expectations by 7 cents, according to FactSet. Sales advanced 17% to $815.2 million, at the top of the preliminary report last month, and above calls for $810 million.
Dexcom's G7 has been available in Europe since last fall. The company says it's converting users from other body-worn devices and adding patients who previously relied on finger pricks and test strips.
CGMs tend to be popular among patients who need insulin to treat their diabetes. But Dexcom calls for the Centers for Medicare and Medicaid Services to sign off on reimbursement of its devices for patients with a less severe form of diabetes this year.
"Management confirmed their expectation that these new patients would contribute 1% of total revenue this year," Thibault said. "We think this remains a relatively conservative target given 75% of Dexcom reps are targeting (primary care physicians) and we think physician/patient awareness will increase into the catalyst."
She kept her buy rating and 126 price target on Dexcom stock.
Shares Offer Multiple Entries
In the aftermath of the earnings report, Dexcom stock bounced off its 50-day moving average, giving investors an early entry. Shares are also consolidating with a traditional buy point at 125.65, according to MarketSmith.com.
Dexcom stock could also form a handle, though that largely depends on the market. The market is currently in a pullback, which makes new buys somewhat tricky. The base also can be interpreted as a double bottom with a 117.64 buy point.
Shares have a strong EPS Rating of 91, which puts them in the leading 9% of all stocks when it comes to profitability, according to IBD Digital. But Dexcom stock has a lower Composite Rating of 86. This means shares rank in the top 14% of all stocks in terms of fundamental and technical measures.
The Relative Strength Rating is a middling 78, which reflects 12-month performance on a 1-99 scale. Dexcom stock's relative strength line is getting a lift after a failed breakout in December.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
