Can selling puts in Dexcom save your financial future?

On December 4, 2024, financial analysts noted a renewed interest in Dexcom, Inc. (DXCM) as it struggles to overcome challenges faced in the initial part of the year. The company is recognized for its innovative continuous glucose monitoring (CGM) systems, which have become increasingly indispensable in managing diabetes. As the diabetic population expands globally, Dexcom’s technology is well-positioned to capture this growing market. The stock had recently broken above a $75 resistance level, indicating a potential shift in investor sentiment that could lead to a rally towards its target of $110 per share. This movement in the stock price aligns with the overall outperformance of the stock compared to the S & P 500 index. Investors also observed that despite struggling performance, Dexcom has maintained a premium valuation, trading at 38 times forward earnings, significantly higher than the industry average of 25 times. This valuation, however, can be seen as being justified by its strong growth metrics, including an expected earnings per share (EPS) growth rate of 23%, while the industry median stands at a mere 9%. Additionally, Dexcom has recorded a revenue growth rate of 14%, outpacing the industry median of 6%. The company's net margins of 17% surpass the industry median of 14%, underscoring Dexcom's ability to achieve superior profitability even amidst fierce market competition. With the continued global increase in the adoption of CGM systems and an expansion in reimbursement coverage in emerging markets, Dexcom is strategically poised to turn around its recent revenue declines. The increased usage in diabetes management is reflective of a larger trend that is likely to benefit Dexcom in the medium to long term. Notably, as competition in medical technology heightens, organizations like Dexcom that prioritize innovation can potentially gain significant market share. This strategic positioning may make it an attractive option for investors looking to capitalize on growth in the health care sector. In a tactical move to leverage this potential, one investor discussed selling a cash secured put option in December 2024 for Dexcom, allowing for the possibility of acquiring shares at a discounted price if the stock price falls below $80. This move illustrates the overall bullish sentiment surrounding Dexcom amidst the broader market trends in the diabetes management space, setting the stage for a possible recovery and growth in stock performance.