Stock (Symbol) |
Illumina (ILMN) |
Stock Price |
$222 |
Sector |
| Healthcare |
Data is as of |
| November 27, 2017 |
Expected to Report |
| Jan 29 |
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) has been a hot stock this year even though profit growth hasn’t been great. The reason is solid demand for its state-of-the-art NovaSeq gene sequencing system. Illumina’s HiSeq X system was introduced in 2014 and profits soared 52% that year as the stock ran from $115 to $185. Then last January Illumina introduced a new revolutionary gene sequencing system, NovaSeq. But the problem is institutions and universities just loaded up on the last great system, so sales were expected to be light, as organizations are tied to budgets and upgrading systems 2-3 years later might be hard to do (Illumina does do trade-ins and rebates for upgrades to ease the pain, but NovaSeq’s cost $1 million each). This 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. NovaSeq will eventually take that cost down to $100. ILMN’s profit growth is expected to accelerate from 14% last qtr to 39% next qtr and 61% two qtrs out. But a lot of the good news is already priced into the stock, which has gone from $125 to $225 in a year. ILMN always has a high P/E, and that’s the case today as it’s 50. This stock is on my radar for the Growth Portfolio., but it’s a tough one to catch. I had my opportunity a year ago when the stock was around $125, but profit growth was meh so I passed. Now the stock seems extended here and I hope it will come down in 2018 so I can get in. |
One Year Chart |
 Last qtr ILMN reported 14% profit growth on 18% sales growth, and beat the street. Annual estimates ticked up across the board. Notice this stock broke out in early 2017 and hasn’t had a correction since. I feel there’s a lot of people with good profits in this stock, and if ILMN does come down a bit that could cause them to sell, which could make the stock fall further. Qtrly Estimates are for 39%, 61%, 32% and 6% profit growth the next 4 qtrs but that’s because comparisons in the year-ago periods are easy. The Est. LTG of 14% is low, I feel ILMN will grow faster. That P/E of 50 is very high in comparison to the Est. LTG., but ILMN always has a high P/E because its on the cutting edge of technology. |
Fair Value |
 Look at how high the P/E has been the past decade. While profit growth has averaged just 20% the last ten years. Whew, this is a pricey stock. So I feel ILMN is worthy of a P/E of 50 and that gives me a 2018 Fair Value that’s around the current price. |
Bottom Line |
 Illumina’s been a good stock for the past decade, but the climb has been erratic at times. I’m trying to get this stock on a dip, but that might be hard to do in the coming year with profit estimates looking so good. In the end there’s great growth expected for 2018 but I feel all or most of the good news is already priced into the stock. ILMN is on my radar for the Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
