"While we do not think shares are overvalued and could argue for a bit more upside as revenue should continue to exceed guidance in our opinion, we do feel a lot of good news is priced in, and given the historical volatility we would like more significant upside than we see at this time to maintain our Buy rating," analyst Sean Lavin wrote in a note.
Lavin noted that the current valuation is more in line with the historical average of 9.6X, but certainly above it. But, he cautioned that the multiples would fall significantly if the revenue and margin growth slows and should expenses surpass expectations.
Despite acknowledging that the revenue beats and raised guidance along with Medicare reimbursement will be positives, the analyst pointed out that the competitive news and trialing could be negatives.
"We think expense control and a focus on profitability will be the next needed catalyst to move shares meaningfully higher, but also the largest risk if expenses keep moving higher," Lavin added.
Shares of DexCom closed Tuesday's regular trading session at $91.88. At time of writing Wednesday, shares were slightly down (0.10 percent) and trading at $91.79.
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