Why DexCom Stock Flopped on Friday

The stock of highly specialized healthcare company DexCom (NASDAQ: DXCM) wasn't the picture of health on Friday. It lost nearly 2% of its value in that day's trading session, on the back of an earnings release that raised investor concerns about slowing sales growth. The S&P 500 index outperformed the stock, and that's not saying much, as it essentially ended the day flat over Thursday.

Slight beats on the top and bottom lines

Reporting its third-quarter results after market hours Thursday, DexCom said its revenue amounted to $994 million for the period. This was, however, only 2% higher on a year-over-year basis for the previously fast-growing glucose monitoring products specialist. Non-GAAP (adjusted) net income fell to slightly over $181 million ($0.45 per share) from the year-ago figure of $204 million.

According to Zack's, the consensus analyst estimate for profitability was $0.43. Meanwhile, DexCom only marginally topped the average prognosticator projection for revenue.

During the quarter DexCom launched a new product, Stelo, a glucose biosensor for adult patients with prediabetes and type 2 diabetes not currently on insulin therapy. The company doesn't hesitate to point out that it's the first such product available over the counter in this country. This rollout, plus product launches in Australia and France, was a key driver of that top-line growth.

Modeling at least 11% revenue improvement this year

DexCom proffered guidance for the entirety of 2024. It's forecasting revenue of roughly $4 billion to $4.05 billion for the year, which would represent growth of at least 11% over the 2023 figure. Its adjusted operating margin should land at around 20%; the company did not provide more specific profitability estimates.

Given that it's a business with a solid product lineup and a compelling new offering (Stelo), investors were clearly expecting more from its third quarter. I don't think DexCom is doing badly, but it'll probably need to juice those top-line numbers to be a more compelling stock for this discerning market.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.