Illumina (ILMN) Stocks tumbled Friday after the DNA-reading giant cut its outlook as macro pressures on life science tools companies continue to mount.
X
Illumina expects to ship only 330 million to 340 million NovaSeq X instruments for the year, a downward revision from its previous forecast of 390 units. Illumina announced NovaSeq X in September 2022, touting the system’s ability to sequence more than 20,000 genomes in one year.
However, Canaccord Genuity analyst Kyle Mixon said in a report that customers are not taking advantage of them as quickly as originally expected. In fact, purchasing constraints are lengthening sales cycles.
“Despite a seemingly strong start to product launches that the company believes will drive long-term growth, the decline in listing expectations is relatively alarming,” he said in a report. We are thinking about it.” “In light of near-term macroeconomic challenges, Illumina has lowered its 2023 guidance metrics.”
In afternoon trading on the stock market, Illumina stock fell 9.3% to around $97.
Illumina Stock: Launch Slowdown
Mikson notes that the rollout of NovaSeq X appears to be slow. Illumina shipped 97 systems in the third quarter, down from 109 systems in the second quarter.
“However, due to longer sales cycles between customers, Illumina expects placements to decline further,” he said.
According to FactSet, sales rose only 1% to $1.12 billion (at constant currency), below expectations of $1.13 billion. However, adjusted earnings came in at 33 cents per share, beating expectations. Illumina stock analysts had expected just 14 cents. Illumina targeted 10 to 15 cents.
Evercore ISI analyst Vijay Kumar said Illumina was not the only life sciences tools company to see poor performance toward the end of the year.
“So far, all tool companies have revised their earnings downward, with outlooks for fiscal 2024 showing flat to low single digits,” he said in a report. “And Illumina fits this pattern.”
However, he lowered his price target for Illumina stock from 180 to 160. Kumar’s rating remains Outperform.
Holy Grail headache continues
Meanwhile, Illumina is still suffering from the Holy Grail headache. In 2021, the company acquired Grail, which makes cancer detection tests, for $8 billion. The acquisition was completed despite opposition from US and European regulators. Now, European regulators have ordered Illumina to sell Grail.
Conor McNamara, an analyst at RBC Capital Markets, said the best thing Illumina’s new CEO, Jacob Seison, could do is “invent a time machine and convince his predecessor to forget about the Holy Grail.” said that he had done so. “Don’t get me wrong, I’m here to focus on our core business,” Seison said at the beginning of his first conference call as CEO.
“With $64 billion in market capitalization erased from its peak in August 2021, we believe one statement should cause many investors to re-engage with Illumina,” McNamara said in the report. .
However, McNamara also lowered his price target from 318 yen to 260 yen. He predicts that DNA sequencing will become a core part of biopharmaceutical research in the future, and Illumina should maintain its dominant position in the market. But it’s unclear when Illumina will return to growth. He still maintains an Outperform rating on Illumina stock.
Similarly, Canaccord’s Mr. Mixon lowered his price target for Illumina stock from 210 yen to 120 shares and lowered his rating on the stock from “buy” to “hold.”
“Importantly, the company noted that its initial outlook for 2024 results is consistent with 2023 (i.e., sales and operating margins are flat),” he said. “In fact, this represents the third consecutive year of nominal revenue growth for Illumina.”
Follow Alison Gatlin on Platform X, formerly known as Twitter. @IBD_AGatlin.
You may also like:
Amirix falls 32% on quarterly report with poor outlook for 2024
AstraZeneca makes $2 billion bet on rival Lilly on obesity drug
Looking for the next Apple or Amazon? Start with these lists that beat the S&P 500
Options Trading: How to Get Started with Options and Manage Risk
Profit from short-term trends with SwingTrader