Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

Analysts View DexCom, Inc. (DXCM) Stock Bullishly


DexCom, Inc. (NASDAQ:DXCM) stock has received a string of buy ratings from analysts following a surprise ruling from the U.S. Centers for Medicare and Medicaid Services (CMS).

The CMS has now ruled that DexCom’s continuous glucose monitoring product for diabetes sufferers is therapeutic. Dexcom’s G5 system- the first such glucose device to receive this classification- will now be eligible for Medicaid and Medicare coverage.

Immediately following the news on Jan 13, five top analysts published Dexcom buy recommendations: Stephens’ Chris Cooley; Canaccord Genuity’s Kyle Rose; JP Morgan’s Michael Weinstein; BTIG’s Sean Lavin and Oppenheimer’s Steven Lichtman.

Lichtman writes “Established payment levels in the CMS decision for sensors/transmitters looks reasonable, in our view. DXCM will work with CMS to get coverage fully implemented in the coming months, but certainly timing looks to fall ahead of the 1H18 previous expectation. Given this unique opportunity to DXCM, we see this as another offset to competition in 2017 along with the recent dosing claim approval and expanding international reimbursement.”

And 2018 is also shaping up nicely says Lichtman as Dexcom “continues to build the story toward additional big positives in 2018 including launch of the next-generation G6 (early ’18E) and first product from the GOOG Verily collaboration (2H18E)”. Lichtman has a 100% success rate and 30.4% average return on Dexcom stock according to financial accountability engine TipRanks.

Surprise decision

On Jan 13 shares jumped 30% on the news and finished the day almost 26% up. Although the approval was expected, the timing of the news came as a surprise. JP Morgan’s Weinstein suggested that the approval was 12-18 months ahead of Street expectations.

Meanwhile BTIG analyst Lavin commented, “We aren’t surprised DXCM gained the classification and coverage, but we are surprised how quickly CMS reached this decision… The fact that the ruling was released so expediently demonstrates that CMS recognizes the benefits of CGM.”

This recent burst of recommendations fits with the average analyst consensus on TipRanks of strong buy- with only one hold recommendation and no sell recommendations made in the last three months.

Following the surge in share price, the average analyst price target for Dexcom on TipRanks now represents a marginal upside of 0.08% from the current share price. As this TipRanks’ screenshot shows, the average analyst price target for Dexcom is $85.2 (based on analyst price targets in the last three months) versus the current share price of $85.13 at Friday’s close.

Only time will tell whether future analyst ratings with adjusted price targets push the average price estimate higher or whether targets already price in an ultimate CMS success story.

Out of the five recent buy ratings described, the maximum upside percentage is 11.95% (from Kyle Rose) while Chris Cooley’s price target of just $75 represents an equivalent -11.9% downside. In other words, while both analysts recommend buying Dexcom shares, a rather considerable $20 price difference remains between the two targets.

 

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