Shares in this medical equipment company just hit a 52-week high, and double-digit sales growth is fueling momentum.
DexCom (DXCM)
from Cabot Top Ten Trader
DexCom (DXCM) looks ready to run, bolstered by its outstanding growth story; the company makes some of the best continuous glucose monitors (CGMs) in the industry. Its G4 Platinum device, which was just approved in June, is the smallest and lightest on the market, with a smaller needle and greater wireless range, too. (It also recently released a mobile communications add-on, so results can be sent to five smart phones.) Most important, the device is approaching fingerstick accuracy; the company’s long-term goal is to replace fingersticks entirely!
The G4 has kept growth on the fast track (sales have generally been advancing at a 50% to 65% clip for many quarters), and growth should remain rapid for years as DexCom has made huge inroads into the pediatric market and is aiming to get broader payer coverage for those over 65.
The valuation is huge, but with the best product in the market and a huge stream of recurring revenue (from the sensors on its CGMs), DexCom has a very big story. DXCM had a very big run with the market from late-2012 through March of this year, and then it began a big basing period—the stock suffered a 44% drubbing during the spring decline, and then took many months to wear out the remaining weak hands. DXCM eventually formed a base-within-a-base, consolidating in a tighter range during September and October before the earnings report helped the stock surge to new highs.
You could nibble here or on dips, but expect volatility.
Suggested Buying Range: 50-53
Suggested Loss Limit: 45-46
Note: Cabot’s buy range is valid for two weeks.
Michael Cintolo, Cabot Top Ten Trader, www.cabot.net, 978-745-5532, November 17, 2014