Dexcom's stock price drops over 40%, approaching its worst day on record.

• Dexcom, which went public in 2005, is on track for its worst day in stock market history.
• The company reported disappointing revenue on Thursday and lowered its full-year guidance.
• The shortfall was attributed to the sales team restructuring and decreased revenue per user by executives.

On Friday, shares of the diabetes management company sank more than 40% after reporting disappointing revenue for the second quarter and offering weak guidance.

The stock price of Dexcom dropped $45.38 to $62.47 in early afternoon, resulting in a loss of approximately $18 billion in market capitalization. This was the largest decline in the stock's value since September 2017, when it fell 33% in a single day. Dexcom went public in 2005.

According to a release late Thursday, Dexcom's revenue increased 15% to $1 billion from $871.3 million a year earlier. However, analysts were expecting revenue of $1.04 billion, according to LSEG.

The forecast for the third quarter was the main concern for investors. Dexcom expects revenue of $975 million to $1 billion, which is lower than the $4.20 billion to $4.35 billion it forecast last quarter. The company attributed this change to "certain unique items impacting 2024 seasonality."

Dexcom provides a range of products, including continuous glucose monitors (CGMs), for patients with diabetes. During the earnings call, CEO Kevin Sayer attributed the company's challenges to a restructuring of the sales team, fewer new customers than anticipated, and lower revenue per user. Some of the shortfall was due to customers taking advantage of rebates for the new CGM called the G7. Furthermore, the company underperformed in the durable medical equipment (DME) channel.

"Sayer stated on the call that the DME distributors are crucial partners for our business, but we have not performed well this quarter in relation to these partnerships. He emphasized the need to re-focus on these relationships."

On Friday, analysts downgraded the stock from a buy to a hold, stating that the report represented a "sharp turn in the wrong direction." Although they still have some unanswered questions, they are confident that the company's performance was due to internal issues and not tied to market changes like the surging popularity of weight loss treatments called GLP-1s.

On Thursday's earnings call, JPMorgan's Robbie Marcus questioned the significant decrease in guidance, expressing surprise at the extent of disruption that could result from altering the sales force structure.

Marcus expressed that he believed there must be more happening and inquired about the effectiveness of GLP-1s.

Sayer stated that the company is experiencing a shortfall of new patients compared to what was anticipated at this stage. He attributed this to the sales force reshuffling, which resulted in changes in geographic coverage and left physicians dealing with unfamiliar reps.

The JPMorgan analysts emphasized the extent of the negative impact and stated that it seems to be largely self-inflicted, which is difficult to comprehend in its entirety.

Dexcom's finance chief, Jereme Sylvain, stated that the company's guidance for the year at the top end is facing a $300 million shortfall due to various factors. He explained that this is not something the company is pleased with and that they need to provide full transparency about the impact on the balance of the year. Sylvain added that the G7 rebate eligibility was three times faster than the G6, which led to the loss of customers who have the highest annual revenue per year.

William Blair analysts found Dexcom's results to be "disappointing," but their long-term outlook remains unchanged. Despite this, they believe Dexcom has the potential to expand the market and regain lost shares.

In a note on Friday, they stated that these short-term dynamics would be temporary.

According to Leerink analysts, the "magnitude of the sell-off is overdone," and the current issues affecting the company are unlikely to have a significant impact on Dexcom's long-term trajectory, as stated in a report on Friday.

The U.S. Food and Drug Administration has cleared Dexcom's new over-the-counter CGM, Stelo, for use by patients with Type 2 diabetes who do not use insulin. Dexcom announced Thursday that it will officially launch Stelo in August.

Despite the S&P 500's 15% increase this year, Dexcom shares have fallen nearly 50%.

WATCH: Dexcom cuts forecast