Chicago, IL – December 23, 2024 – Today, Zacks Investment Ideas feature highlights DexCom, Inc. DXCM and Albemarle Corporation ALB.
2025 Picks: 2 Stocks to Buy Now for 50% Upside
The post-Fed stock market selloff on Wednesday helped cool off an overheated market.
A larger downturn will come eventually to recalibrate overheated stocks.
Thankfully, the bulls need not worry because the outlook for 2025 and 2026 earnings growth remains massive, and slower rate cuts indicate a sturdy economy.
Investors must strike whenever the next big stock market sale occurs.
In the meantime, we look at two S&P 500 stocks—DexCom and Albemarle—that are already on sale for investors to buy in 2025.
DXCM is a connected medical device giant trading around 50% below its records.
ALB is a lithium mining powerhouse that's fallen over 70% from its records.
Why This Medical Technology Stock is a Must-Buy in 2025
DexCom, Inc. makes continuous glucose monitoring systems for people with type 1 and 2 diabetes. DexCom's devices are part of a wave of connected health technologies that will become standard care.
The connected medical device standout grew its sales from $160 million in 2013 to $3.62 billion in 2023, including 29% average growth in the trailing five years. DXCM's growth is set to slow against its recent breakneck pace. But it launched the first over-the-counter glucose biosensor in the U.S. in August.
DXCM then on December 17 introduced its first artificial intelligence-enhanced offering. Dexcom's "GenAI platform will analyze individual health data patterns to reveal a direct association between lifestyle choices and glucose levels while providing actionable insights to help improve metabolic health."
DexCom's rapid expansion was driven by its innovations and its soaring addressable market. Over 1 in 10 American adults have diabetes and more than 1 in 3 have prediabetes, according to the CDC. Diabetes rates are also skyrocketing outside of the U.S.
This backdrop is why DexCom stock skyrocketed roughly over 3,650% during the past 15 years, blowing away the S&P 500's 440%. DXCM has chopped around over the last several years as Wall Street struggles to price in slowing growth, valuation levels, and more recently the possible impact of GLP-1 weight loss drugs.
DexCom tanked after it provided disappointing guidance this summer. The medical device stock is down 40% in 2024 and 53% below its 2021 peaks. The stock found support after its July nosedive near its pre-Covid heights and its 2022 lows.
DXCM could be ready to march higher in 2025 and eventually reach new highs once it breaks out of the trading range it's been stuck in for the last five years—DexCom traded in a similar range in 2015-2018. DXCM also trades 30% below its average Zacks price target.
DXCM is projected to grow its revenue by 11% in 2024 and 15% in 2025 to reach $4.60 billion (adding $1 billion to the top line between FY23 and FY25). DexCom is projected to grow its adjusted earnings by 13% and 19%, respectively, and it has topped estimates for 10 quarters running.
Its valuation is holding DexCom back, but it trades 80% below its three-year highs and not too far above its highly-ranked Medical – Instruments industry at 37.2X forward earnings. DXCM trades at a 25% discount to its industry in terms of its price/earnings-to-growth (PEG) ratio despite outperforming it 450% to 150% in the past 10 years.
Wall Street remains bullish on DexCom, with 16 of the 22 brokerage recommendations Zacks has at "Strong Buys." DXCM is also sitting on a ton of cash and has a solid balance sheet.
Why Lithium Powerhouse ALB Stock Looks Like a Long-Term Buy in 2025
Albemarle Corporation is the world's largest lithium producer, benefitting from the long-term expansion of tech devices, electric vehicle batteries, energy storage, and more. Lithium batteries have been used in electronics such as smartphones for a long time.
EV batteries are orders of magnitude larger than iPhone batteries, and energy storage batteries are set to play a growing role in the economy going forward.
The Charlotte, North Carolina-headquartered specialty chemicals firm serves customers in roughly 70 countries. Albemarle's Nevada location is the only operating lithium mine in the U.S. ALB also owns mines in Chile and Australia.
Albemarle, like many of its lithium mining peers, soared on the back of skyrocketing lithium prices between early 2021 and late 2022. The bull run was fueled by the overnight push from Ford, Volkswagen, and other auto giants to go all in on EVs to catch up to Tesla and meet what they assumed was massive demand.
EV sales and demand have waned and China continues to flood the lithium market. Lithium prices have tanked over 80% since they peaked near the end of 2022. The boom-and-bust cycle forced Albemarle earlier this year to pause plans to build a $1.3 billion refinery in South Carolina and partially halt its Australian expansion.
Albemarle is in the midst of its second reorganization in as many years. ALB is streamlining its business amid a return to more normalized lithium prices.
Albemarle is projected to see its sales tank 43% in 2024 and come in roughly flat in 2025. This outlook comes against a backdrop of 120% sales growth in 2022 and 31% higher revenue in 2023.
On top of that, ALB is set to pull in far higher sales in FY24 and FY25 ($5.40 billion) than it did any year before its recent boom—its previous sales peak was $3.59 billion in 2019.
The company is expected to swing from earnings of +$22.25 per share last year to a -$1.49 loss in FY24. ALB is projected to rebound to +$1.85 next year.
Albemarle is positioning itself to compete at lower lithium prices for longer, and Wall Street has been pricing in its earnings drop for almost two years. ALB trades 73% below its 2022 highs, yet it is still up 25% in the last five years. On top of that, ALB has more than doubled the S&P 500 in the last 25 years, up 830% vs. 355%.
ALB is attempting to find support at its 200-month moving average—the last time ALB tested its 200-month it went on a massive run. ALB trades at some of its most oversold RSI levels over the last 20 years.
ALB's tumbling stock price, mixed with its strong balance sheet has it trading near its 15-year lows in terms of price to book at 1.3X. Albemarle trades at a 55% discount to its 15-year median and 55% vs. the Zacks Basic Materials sector.
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