Key Takeaways:
- DexCom grew revenue by 14% in Q1. It expects sales to touch $4.6 billion in 2025 revenue with EBITDA of $1.4 billion.
- DexCom’s expanding insurance coverage should help it grow revenue and earnings going forward. Two major PBMs now cover all diabetes patients, opening access to 25 million type 2 non-insulin users.
- The FDA-cleared 15-day G7 sensor and OTC Stelo product should drive user growth and enhance profit margins.
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DexCom (DXCM), valued at a market cap of $34 billion, develops and commercializes continuous glucose monitoring (CGM) systems for diabetes management. Its product line includes Dexcom G6, G7, Share, Real-Time API, and Stelo, an over-the-counter glucose biosensor for adults with prediabetes and Type 2 diabetes.
DexCom sells directly to healthcare providers and enables remote monitoring for patients, caregivers, and clinicians.
DXCM stock went public in April 2005 and has returned 2,400% to shareholders in the last two decades, indicating a compounded annual growth rate of almost 18%. Despite these outsized gains, the healthcare stock is down almost 47% below all-time highs, allowing you to buy the dip.
Here are three reasons why Dexcom stock is a good buy at the current valuation.
1. Strong Q1 Performance Shows Accelerating Growth
DexCom reported revenue of $1.036 billion in Q1 of 2025, representing 14% organic growth year over year. It demonstrated a strong performance in the U.S. market with 15% growth, while international markets grew by 12% organically.
This marks the second consecutive quarter of reaccelerating revenue growth, driven by record new customer additions and expansion of its active user base to approximately 2.8-2.9 million globally.
These impressive results have contributed to the renewed optimism surrounding DexCom stock in recent months.
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2. Expanding Access Creates Massive Opportunity for DXCM Stock
DexCom has made significant strides in expanding insurance coverage for its CGM technology. As of January 2025, two of the three largest pharmacy benefit managers (PBMs) now cover DexCom CGM for anyone with diabetes, regardless of insulin use.
The company expects commercial coverage for more than five million people with type 2 diabetes who are not on insulin by the end of 2025.
This expanded coverage opens a substantial market opportunity, as the type 2 non-insulin population in the U.S. exceeds 25 million people, with current CGM penetration at only about 5%.
DexCom’s randomized controlled trial for type 2 non-insulin users is expected to read out in late 2025 or early 2026, further expanding coverage and providing another catalyst for DexCom stock.
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3. Product Innovation Driving Growth and Margin Expansion
DexCom has received FDA clearance for its 15-day G7 CGM system, which will launch in the second half of 2025. This longer-wear sensor improves the user experience and will drive margin expansion by requiring fewer monthly sensor changes.
DexCom’s newest product, Stelo, the first over-the-counter CGM, has attracted more than 140,000 users since its launch in August 2024, with a majority signing up for subscription services.
DexCom is expanding its manufacturing capacity with facilities in Malaysia and Mesa, enhancing operational efficiency through automation.
These initiatives and the 15-day sensor are expected to contribute to DexCom’s financial performance. The company projects approximately $1.4 billion in adjusted EBITDA for 2025.
With full-year 2025 revenue guidance of $4.6 billion (representing 14% growth) and multiple growth catalysts on the horizon, analysts remain bullish on DexCom stock as it continues to innovate and expand access to its life-changing technology.
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Valuation Setup for DexCom Stock
Analysts tracking DexCom expect its sales to rise from $4 billion in 2024 to $6.1 billion in 2027. Comparatively, adjusted earnings are forecast to expand from $1.64 per share in 2024 to $3.10 per share in 2027.
DXCM stock trades at a forward price-to-earnings multiple of 40x, significantly lower than its five-year average multiple of 106x.
If DexCom stock trades at 35x forward earnings, it will be priced around $110 in early 2027, indicating an upside potential of almost 30% from current levels.
Of the 26 analysts tracking DXCM stock, 23 recommend “Buys” and three recommend “Hold”. There is no “sell” recommendation for the healthcare stock.
Wall Street remains bullish on DXCM stock and, given consensus price targets, expects it to gain 12% over the next 18 months.
TIKR Takeaway for DexCom Stock
DexCom’s strategic positioning in the continuous glucose monitoring market presents a compelling investment opportunity.
With accelerating revenue growth, expanded insurance coverage, and innovative products like the 15-day G7 and over-the-counter Stelo, DexCom is poised to capture significant market share in the underserved type 2 diabetes segment.
Trading well below its historical valuation multiples despite strong fundamentals, DexCom stock offers investors exposure to the growing diabetes care market, making it a top investment choice right now.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
