Consistently Boring

Consistently Boring

Yesterday Dexcom pre-announced earnings which seem to disappoint the street so naturally in trading today shares got hammered falling almost 9%. Now that the full earnings have come out once again Dexcom is doing what they always do raising full year guidance. Where the stock trades tomorrow is anyone’s guess, but we’ll say this whenever the street doubts Dexcom, whenever the stock gets hammered it comes back and typically with a vengeance. This happens with such frequency it’s almost boring. As Robert Duvall said in that great movie Apocalypse Now; “Don’t these people ever give up.”

It’s about time everyone started comprehending some pesky facts, yes we know these pesky facts gets in the way of expectations, but they are facts.

1. The CGM market is nowhere close to maturing and quite frankly has not even hit its teenage years.

2. Dexcom and Abbott OWN this market and are coexisting quite nicely.

3. Once CGM makes the transition from insulin using patients to ALL patients watch out.

4. Prepare to be amazed  when CGM moves from diabetes to other areas with excuse the expression obesity being the biggest area for future growth.

5. Doubt Dexcom if you wish but as Momma Kliff said so often this isn’t exactly a bright move.

Now onto this afternoons call and what we learned.

2022 is setting up as an important year for CGM as the company noted today the G7 which was originally expected in 2021 will likely arrive in 2022. Along with this they noted that rather than launch G7 as a 15-day life it will initially come with a 10-day life. Neither of these items is all that shocking given the company’s focus on putting the patient first even when that means putting their business interest second. The reality is there is no rush to get G7 here and better to get right the first time around.

Now some may say that this news is more important to Abbott as they continue to deal with the automated insulin dosing (AID) issue with Libre 2 and also gives them time to complete the clinicals for Libre 3. Basically what this means is that 2021 will be more of the same and 2022 will be when the two companies go head to head, and it will be G7 vs. Libre 2 (without the AID issue) or Libre 3.

Given the growth in the CGM market combined with the respective strategies of both companies – Abbott value – Dexcom premium yet affordable – we don’t see any major changes.

That being said the analysts will likely take this news as a negative which for smart investors will create an opportunity to buy Dexcom at levels not seen in a while. This short-term focus by analysts combined with amazing rise in Dexcom shares, up over 74% YTD, over 158% 1 Yr. and 203+%2 Yr. – could create a buying opportunity. As we said when we started this post it’s not exactly a great idea to doubt Dexcom over the long term but it’s amazing just how many people do just that which proves something else Mom said there is no cure for stupid.