Analyst Note| Debbie S. Wang |
No-moat Dexcom posted strong first-quarter performance that was largely in line with our expectations for the full year. However, after dialing up our expectations for the impending launch of next-generation G7, we plan to modestly raise our fair value estimate. Shares remain overvalued, from our perspective. The firm continues making progress toward navigating the regulatory path to commercializing G7. We anticipate the firm will file for European regulatory approval shortly, and management remains firm that Dexcom should launch in that geography by the end of this year. Additionally, with the U.S. pivotal trial set to wrap up this summer, we could see G7 launch domestically in the second half of 2022. Considering Dexcom has firmly crossed over into profitability, we think it’s appropriate to reexamine whether the firm has dug a moat for itself. At first blush, we think there may be an argument for intangible assets--specifically the firm’s ability to innovate and offer superior accuracy in its continuous glucose monitors.