Shares of DexCom (DXCM 0.93%), a medical device specialist, have lagged the broader market so far in 2025, down 11% year to date. The diabetes-focused healthcare company has faced several legal and regulatory challenges that continue to weigh on its performance.
However, the company's financial results have been pretty strong. And if DexCom can keep that up in its next quarterly update -- due after the market closes on Oct. 30 -- while addressing the challenges it has encountered, it might be worth buying the stock. Let's find out what DexCom might have in store.
Will sensor issues sink sales?
DexCom is a major player in the continuous glucose monitoring (CGM) market. These devices help diabetes patients monitor their blood sugar levels in real time throughout the day, an activity that is incredibly vital for them. DexCom launched its latest device, the G7, in the U.S. in 2023.
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However, some patients have complained about inaccurate readings, which can cause severe problems for diabetics. While this issue likely hasn't affected the majority of the company's nearly 3 million customers (many of whom are still on older G6 devices), some have filed class action lawsuits against DexCom.
Meanwhile, in March, the company received a warning letter from the U.S. Food and Drug Administration over manufacturing issues at some of its facilities, which sent its stock price down sharply.
It will be essential to monitor how DexCom deals with these challenges in its upcoming quarterly update. The company's guidance for its fiscal 2025 implies year-over-year revenue growth of about 14% to 15%, and the market will be looking for something in that range in the third quarter. If DexCom falls short of that, its share price will drop significantly. But if the company can perform well despite these challenges, and post top-line growth well ahead of expectations, the share price might soar.
It's worth noting that DexCom is a leader in CGM, with some of the best devices on the market. The company's most important competitor, Abbott Laboratories, faced issues with its own FreeStyle Libre not that long ago that led to a recall. However, the FreeStyle Libre remains one of Abbott's biggest growth drivers. Quality control issues of one type or another aren't that rare in the medical device industry and usually don't amount to insurmountable headwinds, at least not for otherwise well-performing corporations.
DexCom should be fine, especially given its revenue continues to grow at a good clip. Buying the stock right now might be a great idea, even more so considering the company's long-term outlook.
NASDAQ: DXCM
Key Data Points
Why DexCom's future looks bright
DexCom helped pioneer the use of CGM, a technology that is superior to the blood glucose meters (BGMs) it is slowly replacing. The latter are highly accurate, to be clear, but only measure sugar levels at a single point in time and require painful fingersticks to get the job done. CGMs are hard at work throughout the day and night, automatically measuring glucose levels up to every five minutes and sending alerts to patients to help them make better health decisions.
Yet despite the superiority of CGM technology, many diabetes patients still aren't taking advantage of it. It could be due to a lack of insurance coverage, a lack of awareness, or other factors. But these barriers can -- and have -- been addressed by DexCom. The company has poured plenty of money into marketing efforts and even recruited some celebrities to help. As clinical evidence of CGM's efficacy and improved health outcomes grows, insurance companies and government payers are increasingly coming aboard.
DexCom estimates that in the U.S. alone more than 4.5 million patients eligible for coverage have yet to switch to CGM. The worldwide opportunities are also vast, given that fewer than 1% of the world's diabetics use CGM. While many of these patients will be outside DexCom's range, the company has historically expanded its total addressable market by entering new regions. DexCom's ample untapped opportunity, coupled with its devices being among the best, still makes the stock an attractive long-term bet.
