Canaccord Sticks With Dexcom As Shares Tumble Amid Unexpected Label Addition

Despite a more than 35 percent plunge in DexCom, Inc. (NASDAQ: DXCM)'s stock, analysts at Canaccord Genuity continue to hold a bullish outlook. The firm's Kyle Rose maintains a Buy on DexCom's stock with a price target lowered from $90 to $69.

DexCom's stock was hard hit on Thursday after the U.S. Food and Drug Administration (FDA) granted approval to Abbott Laboratories (NYSE: ABT)'s FreeStyle Libre glucose monitoring system, which creates "more questions than answers" but doesn't imply investors should abandon DexCom, the analyst said (see Rose's track record here).

Approval for FreeStyle Libre was expected to occur at some point in 2017. What was unexpected was the label's inclusion of an insulin dosing indication, Rose said. Based on DexCom's notable selloff, investors may have been expecting this outcome.

"What we do know is that Libre's success to date OUS has clearly validated the patient demand for value-added technology at lower costs — which thus expands the market to patients, including Type 2 patients, who otherwise would not have evaluated the technology," Rose said.

"Longer term, we view this as a positive tailwind for CGM adoption broadly as it will drive continued market expansion, allow more patients to realize the utility of better glucose management, and position industry players to compete on product strengths/weakness to further segment the market."

It's "difficult to handicap" what impact this event will have on Dexcom's growth profile, Rose said. Even with the more competitive nature of the market factored in, the analyst still sees a path for growth, although the following downward revisions were made:

• 2017: From a $0.66 per share loss on revenue of $722.0 million to a loss of $0.72 per share on revenue of $710.3 million.
• 2018: From a $0.16 per share loss on revenue of $958.7 million to a loss of $0.72 per share on revenue of $710.3 million.
• 2019: From a positive EPS of $0.48 per share on revenue of $1.2055 billion to a loss of $0.289 per share on revenue of $1.0513 billion.

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