DexCom Poised to Boost European Sales as G7 Rolls Out; No Change to Our Fair Value Estimate

DexCom posted another quarter of robust top-line growth that leaves the firm on track to meet our full-year expectations, and we’re standing behind our $315 fair value estimate. Importantly, DexCom’s next-generation continuous glucose monitor, the G7, recently received European regulatory clearance and we expect the accelerating launch in that geography should support our estimate for 19% revenue growth in 2022. Despite this progress, we have yet to give DexCom an economic moat, as the entire diabetes market has been a hotbed of innovation lately, which leaves open the door for competitors to potentially leapfrog Dexcom on the technology front. Nonetheless, we have been impressed by how DexCom has maintained its historical advantage on CGM accuracy borne out by best-in-class clinical data (though that gap is closing with Medtronic's and Abbott’s improved technology). In particular, we’re keeping a close eye on the launch of DexCom One—a simplified CGM—in the countries where it is making progress securing reimbursement. We view DexCom One as credible competition to Abbott’s very successful Libre franchise, as both are well suited for the large and underpenetrated type 2 diabetes market.