Stock (Symbol) |
Illumina (ILMN) |
Stock Price |
$175 |
Sector |
| Healthcare |
Data is as of |
| June 20, 2017 |
Expected to Report |
| Jul 24 |
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. Source: Thomson Financial |
Sharek’s Take |
 Illumina (ILMN) develops state of the art products for gene sequencing. The company has been an integral part of reducing the cost of sequencing a gene from $100 million in 2001, to $100,000 in 2009 and $1000 in 2014. ILMN’s 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. Organizations are often tied to budgets. Upgrading systems just 2-3 years later might be hard to do, even with rebates which would be given on trade-ins. Right now profit growth is slow as it seems too early to upgrade. Profit growth was 0% last year and is expected to be just 9% this year. With a 48 P/E, the stock is pricey. But investors reward the company with a high multiple as it is revolutionizing an industry. Right now I have ILMN on the radar, and will look to pick up the stock for the Growth Portfolio if it falls. I missed my last opportunity when the stock was around $125 earlier in the year, and the next time the stock corrects we need to be ready to pounce. |
One Year Chart |
 Profit growth was -10% last qtr, which met analyst estimates. Sales grew 5% with Americas growing 4%, Europe down 2% and Asia Pacific up 15%. Japan was weak due to weakness in genomics funding and China was strong with 35% growth. 2017 profit estimates stayed the same. NxtQtrEst declined from +1% to -20%. Estimates for the following qtrs are +9%, +46% and +52%. The Est. LTG of 14% is lower than I think it should be. |
Fair Value |
 Illumina carries a high valuation. The P/E used to be 60. Now its 48. Still, with slow-to-no growing profits I think that’s still too high. I pegged my Fair VAlue at 45x earnings, but I probably wouldn’t be a buyer until it got down to 35x earnings, which would be $127. Note I missed my chance at this when the stock fell to $124 earlier in the year. |
Bottom Line |
 Illumina’s products continue to be revolutionary technology, but organizations aren’t upgrading their equipment much as many just upgraded a few years ago. ILMN is on my radar, but it would have to go through a correction below $130 for me to consider investing in it for the Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
