Cantor Downgrades Illumina, Is Waiting For This To Happen

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Illumina, Inc. ILMN preannounced lower-than-expected 1Q16 revenues of $572 million, and guided to full-year revenue growth of 12 percent y/y. Cantor Fitzgerald’s Bryan Brokmeier downgraded the rating for the company from Buy to Hold, while reducing the price target from $225 to $165.

Analyst Bryan Brokmeier pointed out that the 6 percent y/y revenue growth was the company’s worst quarterly growth rate since 2Q12.

Lower HiSeq Sales Concerning

Illumina attributed the revenue miss to lower-than-expected sales of HiSeq 2500, 3000, and 4000 instruments, largely due to outsourcing to HiSeq X service providers and fewer-than-expected system upgrades.

Brokmeier added, however, that the decline in HiSeq X Consumable revenue could be due to customers opting to purchase the recently launched Sequel, a product of Pacific Biosciences of California PACB instead of HiSeq.

The weakness in HiSeq is concerning given it is the greatest driver of the company’s consumable revenues. This raises concerns on the sustainability of double-digit growth, the analyst added.

Illumina’s shares have the highest multiple in the industry, Brokmeier pointed out. He added that this high multiple is unsustainable if the company is unable to deliver on growth expectations.

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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsBryan BrokmeieCantor Fitzgerald
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