Stock (Symbol) |
Illumina (ILMN) |
Stock Price |
$160 |
Sector |
| Healthcare |
Data is as of |
| February 26, 2017 |
Expected to Report |
| May 1 – 5 |
Company Description |
 ILMN offers integrated systems, consumables and analysis tools for genetic analysis. It also manufactures sequencing and array platforms, reagent kits and scanning equipment. Its customers include genomic research centers, academic institutions, government laboratories, hospitals and reference laboratories, pharmaceutical, biotechnology, agrigenomics, commercial molecular diagnostic and consumer genomics companies. Its sequencing instruments perform a range of nucleic-acid analyses across a range of sample sizes. Its products and services are used for basic analysis and research, including de novo sequencing, genetic variation analysis, epigenetics and targeted screening, among others. It also provides products and services for other life sciences applied markets, such as agrigenomics. It also offers Clarity Run Manager, Clarity LIMS Silver and Clarity LIMS Gold. Source: Thomson Financial |
Sharek’s Take |
 Illumina (ILMN) jumped higher after the company announced a new revolutionary gene sequencing system, NovaSeq, which will eventually take the cost of a genome from $1000 to $100. The problem is institutions and universities just loaded up on the last great system, HiSeq X, which was introduced in 2014 and brought that cost down to the $1000 level in the first place. Asking organizations to upgrade these systems just 2-3 years later might be hard to do, even with rebates which would be given on trade-ins. The cost of sequencing a gene has fallen from $100 million in 2001, $100,000 in 2009 and $1000 in 2014, so Illumina is doing a fantastic job of inventing revolutionary equipment, but profit growth was 0% last year and is expected to be just 9% this year. Last year the stock crashed from $185 to $139 when the company warned results would be less than expected in the 3rd and 4th qtr due to a reduction in capital spending by institutions and universities. This new revelation caused the stock to pop to the the current $160 level, but buyers need to step up and show Illumina the money for profit growth to return to a respectable 20% level. Currently selling for 44x earnings, my Fair Value on this stock is $127 which is 35x earnings. |
One Year Chart |
 This stock has been a hard one to handle this past year as profit estimates were lowered repeatedly. During the past 4 qtrs 2017 estimates have gone from $3.99 to $4.09, $3.73 and now $3.63. Last qtr the company had just 5% revenue with 5% profit growth which beat the 0% estimate. NxtQtr’s estimate just fell from 20% to -10% (ouch) and Estimates for the following 3 qtrs are 1%, 5% and 29%. That’s not great. Also, the Est. LTG used to hover around 20% and now it’s just 11%. |
Fair Value |
 This stock used to garner a P/E close to 60, but now with growth slowing the valuation has come down. I wish I would have bought this stock last qtr when it was around $125 but there was nothing to suggest the company would be introducing a game-changing catalyst. Still, profits are only expected to climb 9% this year. |
Bottom Line |
 Illumina is doing well in developing new revolutionary technology, but the issue now is organizations need to buy in and upgrade their relatively new systems for profit growth to return to respectable levels. ILMN is on my radar, but I either need to see the company beat the street or up profit estimates to get excited enough to buy for the Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
