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Dexcom shares experienced their largest single-day drop ever on Friday, plunging more than 40% following the company’s disappointing second-quarter revenue report and lowered guidance. The stock fell $43.85 to close at $64, erasing over $17 billion in market capitalization. This steep decline surpassed the company’s previous record drop of 33% in September 2017.
For the second quarter, Dexcom reported a 15% increase in revenue, reaching $1 billion compared to $871.3 million a year earlier. However, this fell short of analysts’ expectations of $1.04 billion, according to LSEG.
The primary concern for investors was the company’s forecast. Dexcom projected third-quarter revenue between $975 million and $1 billion, citing “unique items impacting 2024 seasonality.” Full fiscal-year revenue guidance was revised down to $4 billion to $4.05 billion, a decrease from the previously forecasted $4.20 billion to $4.35 billion.
Dexcom, known for its continuous glucose monitors (CGMs), attributed the shortfall to issues such as a restructuring of its sales team, fewer new customers than anticipated, and lower revenue per user. CEO Kevin Sayer also noted challenges with the durable medical equipment (DME) channel and the impact of rebates for the new G7 CGM.
JPMorgan analysts downgraded Dexcom’s stock from a buy to a hold, citing the report as a “sharp turn in the wrong direction.” Despite concerns, they believe the performance issues are internal rather than due to broader market changes, such as the rise in popularity of GLP-1 weight loss treatments.
Sayer explained that the company is experiencing a significant shortfall in new patients and attributed the drop in guidance to a more disruptive than expected restructuring of the sales force, which altered physician relationships. The DME struggles also contributed to the $300 million shortfall in the company’s guidance.
Despite the dramatic decline, some analysts remain optimistic about Dexcom’s long-term prospects. William Blair and Leerink analysts believe that the current issues are likely to be temporary and do not foresee significant long-term impacts on the company’s trajectory.
Dexcom’s new over-the-counter CGM, Stelo, which was cleared by the U.S. Food and Drug Administration in March, is set for an official launch in August.
Following Friday’s sell-off, Dexcom shares are down nearly 50% for the year, while the S&P 500 has gained 15%.