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Is DexCom (DXCM) Stock a Smart Long-Term Buy?

RiverPark Advisors an independently-owned investment firm, recently published its first-quarter RiverPark Long/Short Opportunity Fund commentary. During the first quarter of 2020, the RiverPark Long/Short Opportunity Fund returned 9.48% (institutional shares), compared to the total return of -19.60% by the S&P 500 Index. You should check out RiverPark’s top 5 stock picks which helped them beat the market by nearly 30 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, RiverPark Advisors highlighted a few stocks and Dexcom Inc (NASDAQ:DXCM) is one of them. Dexcom is a medical device manufacturing company. Year-to-date, DXCM stock gained 83.6% and on May 7th it had a closing price of $404.36. Its market cap is of $37.22 billion. Here is what RiverPark Advisors said:

“DexCom is the leading medical device company focused on continuous glucose monitoring (CGM) systems for people with diabetes. The company has developed a small implantable device that continuously measures glucose levels in subcutaneous tissue (just under the skin), then transmits the blood sugar levels from a sensor on the patient to mobile devices allowing real-time monitoring.

Diabetes, a chronic, life-threatening disease in which the body is unable to produce sufficient insulin, is one of the largest health epidemics in the United States and around the world. According to the ADA, one in every four healthcare dollars was spent on treating people with diabetes. While the CGM market is competitive, Dexcom is the market leader and grew revenue 43% last year to $1.5 billion. Dexcom’s CGM is a platform technology addressing multiple diabetes populations and providers, and eventually other uses for its sensor technology, providing the company a long runway for growth (greater than 20% revenue growth for the years to come). We also believe that the business will be extremely profitable at scale. We expect the company to generate 40% annual EPS growth over the next few years while also generating sizable excess free cash flow.”

In Q4 2019, the number of bullish hedge fund positions on DXCM stock increased by about 11% from the previous quarter (see the chart here). Do you think it is still too early to buy DXCM?

Disclosure: None. This article is originally published at Insider Monkey.

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