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Dexcom stock split: Is the DXCM share price on verge of a post-split surge?

By Rob Griffin

Edited by Jekaterina Drozdovica

14:23, 30 August 2022

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Is the DXCM share price on verge of a post-split surge? – Photo: Shutterstock, Dulin

Shares in Dexcom (DXCM), the US-based medical device company focused on continuous glucose monitoring systems, have risen since the company’s four-for-one stock split earlier this year. 

The Dexcom stock price has risen from $73.46 on 10 June 2022 to $83.38 at market close on 29 August – a 13.5% increase.

So, should investors expect the price to enjoy a post-split surge over the coming weeks, or are there other factors that need to be considered? In this Dexcom stock split analysis, we take a look at the company’s performance, examine recent results and see what analysts expect for the Dexcom stock price.

What is a stock split? 

A stock split is when a company chooses to divide existing high-value shares into a larger number of lower-value new ones. The investor’s share of the overall company remains the same.

“Dividing the shares into smaller units can increase demand for them. This can make an individual share a little more affordable for individual investors,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Streeter also pointed out that a lower price can be useful when companies want to remunerate staff with share options, adding that “the overall value of shares won’t change after a stock split, apart from the usual market movements which can see share prices fall as well as rise.”

What is Dexcom?

Dexcom designs and produces continuous glucose monitoring systems for diabetics. CGM systems serve as an alternative to the traditional blood glucose metre process. The company is evolving its CGM systems to include the disposable sensor and the durable receiver.

The company was founded in 1999, based on the research of Dr. Stuart J. Updike and George P. Hicks in 1967 into implantable, long-performing glucose sensors that the body would not reject.

In a recent investor presentation, the company emphasised that diabetes care remains a “largely unmet global need”, with its core US market having the potential for further growth. It also pointed out that international markets presented “major opportunities” for geographic expansion and broader access.

In February, it debuted its first-ever Super Bowl commercial, starring multi-platinum recording artist, actor and philanthropist Nick Jonas, who was diagnosed with Type 1 diabetes at the age of 13. 

“It means so much to me to bring this message of awareness and the need for improved CGM access to as many people with diabetes as possible,” he said.

Dexcom stock split history and analysis

Dexcom announced in March that its Board of Directors had approved a four-for-one split of the company’s common stock. The Dexcom stock split increases the number of authorised shares of common stock from 200,000,000 to 800,000,000. At the time, the stock price was around $480 a share. 

Stockholders approved the Dexcom stock split at their annual meeting last May, and trading started on a split-adjusted basis on 10 Jun. 

Dexon share price was cut by four following the stock split in May 2022

Debbie Wang, senior equity analyst at Morningstar, doesn’t see a great deal of significance in the Dexcom stock split. She currently (30 August) has a $81 fair value estimate on the stock.

“We’re mainly focused on our projections of cash flow that the underlying enterprise can generate – whether that’s split across 100 or 500 shares,” she told Capital.com.

However, she acknowledged the reasons why such a move can happen. 

“Management sometimes likes to use the stock split to signal confidence in continued growth in share price. It’s not clear to us that there were any concerns about liquidity prior to the split,” she said.

Wang suggested the timing was unfortunate as the market pulled back across the board, particularly for “growth shares” that had enjoyed multiple expansion. 

“As long as growth stocks are under pressure in this volatile market, we think it’s unlikely that another stock split is in the works,” she said.

As for DXCM’s prospects, Wang is watching to see how the G7 (monitoring system) performs in Europe, while awaiting approval in the US. 

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“Now that integration with a range of pumps has become a more significant aspect of DXCM’s CGM technology, we wouldn’t be surprised if we see more delays crop up in the regulatory process, and in commercial adoption,” she added.

Dexcom latest results

The company recently reported financial results for the second quarter ended 30 June 2022, in which it revealed that revenue was at $696.2m – a 17% increase on the corresponding period last year. 

Gross profit hit $449.5m, or 64.6% of revenue, for the second quarter of 2022, compared to $417.1m, 70.1%, of revenue, in the second quarter of 2021.

GAAP net income was $50.9m, or $0.12 per diluted share, for the second quarter of 2022, compared to  $78.4m, or $0.19 per diluted share, for the same period last year.

The company also advanced a number of initiatives, including the expansion of its CGM portfolio strategy in international markets, according to Kevin Sayer, Dexcom’s chairman, president and CEO.

“We are excited for the rest of this year, particularly as we implement a broader launch of G7 in the coming weeks,” he said.

Although the company recorded a decent set of results, the numbers were below what many analysts had expected.

Looking ahead, the company has issued full-year 2022 revenue guidance of $2.86bn to $2.91bn, representing growth of between 17% and 19%. 

In other news, Dexcom announced that its ONE real-time Continuous Glucose Monitoring system will be available on prescription in the UK for people with type 1 or type 2 diabetes using insulin.

In a statement, Karen Baxter, Dexcom Vice President, UK & Ireland, Benelux, France and Spain, said they were working on ensuring the diabetes community can benefit as quickly as possible.

“The addition of Dexcom ONE to the NHS England, Wales, Scotland and Northern Ireland drug tariff is enormous progress towards improving choice of diabetes tech, providing an alternative to burdensome finger pricks and scanning,” she said.

Dexcom stock split: Where next for the stock?

Dexcom stock was rated a “moderate buy”, according to the views of 14 analysts compiled by MarketBeat, as of 30 August. 

The consensus average price target for 12 months was $112.30, up from its $83.38 level at close on 29 August, 2022. This represented a potential upside of 34.69%. The highest price prediction suggested the Dexcom stock price could go as high as $163.75 and as low as $83.

According to the algorithmic forecasts of Wallet Investor, as of 30 August, Dexcom was “an awesome long-term investment”, with shares expected to almost double to $166.13 over the coming year.

Analysts’ price predictions can be wrong and shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading, looking at the company’s fundamentals, technical analysis, latest news and commentary. 

Whether to trade DXOM stock post-stock split should depend on your trading strategy, account size, risk tolerance and other factors related to your personal trading goals. Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose. 

FAQs

When did Dexcom split its stock?

Dexcom announced plans to split the stock in late March 2022. It received shareholder approval in May and started trading on a split-adjusted basis on 10 June. Prior to the stock split, shares were trading around the $480 mark.

Is Dexcom a good stock to buy?

It’s important to do your own research as your decision to trade depends on your attitude to risk, your expertise in the market, your account size, trading strategy and goals. Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose.

Will Dexcom stock go up or down?

It’s impossible to know for sure. Many factors can influence a stock price over a long-term period.

The consensus average price target for 12 months compiled by MarketBeat, as of 30 August and based on 14 analysts’ views, was that the stock could rise to $112.30 from its $83.38 level at close on 29 August 2022. This represented a potential upside of 34.69%. The highest price prediction suggested the Dexcom stock price could go as $163.75, while the lowest has the stock slipping slightly to $83. Remember that analysts’ predictions can be wrong.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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