Dexcom Shares Plummet Following Disappointing Earnings Report

Dexcom Inc. experienced a dramatic decline in its stock price on Friday, with shares dropping over 40%, marking the company's worst trading day to date. This plunge followed the release of its second-quarter earnings, which revealed a revenue increase of 15% to $1 billion, falling short of analysts' expectations of $1.04 billion. The company also revised its full-year revenue guidance downward, now projecting between $4 billion and $4.05 billion, a decrease from the previous forecast of $4.20 billion to $4.35 billion. CEO Kevin Sayer attributed the disappointing results to several internal challenges, including a restructuring of the sales team, fewer new customer acquisitions, and reduced revenue per user. He noted that some of the revenue shortfall was linked to customers utilizing rebates for the new continuous glucose monitor (CGM) model, the G7. Sayer emphasized the importance of durable medical equipment (DME) distributors in their business and acknowledged that the company had not executed well in these partnerships during the quarter. Analysts expressed concern over the significant drop in guidance, with JPMorgan's Robbie Marcus highlighting the unexpected disruption caused by the sales force restructuring. Sayer confirmed that the changes in geographic coverage and sales representation had resulted in a notable shortfall in new patient acquisitions. Despite the sharp decline, some analysts, including those from Leerink, believe the market reaction is exaggerated and that the current issues are unlikely to significantly affect Dexcom's long-term growth trajectory. Following the selloff, Dexcom shares have now decreased nearly 50% year-to-date, contrasting sharply with the S&P 500's 15% gain.