Analysts Move To The Sidelines On Illumina Shares Amid Q1 Warning

Illumina, Inc.

plunged about 26 percent after the company reported disappointing preliminary first quarter results on weaker-than-expected HiSeq demand. Illumina said it expects to record revenue of $572 million in the first quarter. Even though the company's guidance represents a 6 percent increase year-over-year, it missed Street' consensus view of $596.33 million. The company now expects full year revenue growth of about 12 percent, down from prior guidance of about 16 percent due to softer demand in Europe. Read more: http://www.benzinga.com/news/16/04/7855219/illumina-falls-20-after-preliminary-q1-results-fell-short-of-expectations#ixzz46IPpKLwT Analysts have moved to the sidelines post the announcement from Illumina. BofA downgraded the stock to Neutral, and Cantor Fitzgerald's Bryan Brokmeier downgraded the rating for the company from Buy to Hold, while reducing the price target from $225 to $165. Read more: http://www.benzinga.com/analyst-ratings/analyst-color/16/04/7856654/cantor-downgrades-illumina-is-waiting-for-this-to-happen#ixzz46IXNxPWe Mizuho is staying on the sidelines as it reiterated Neutral rating and $150 price target on ILMN shares. "Strong comps, slowing top line growth, and improving competitors have been primary reasons keeping us on the sidelines, with premium valuation adding to the risk," Mizuho analyst wrote in a note. Daniel Arias of Citi said it is unclear what the driving EU dynamic at play is right now, but something is clearly "amiss." Arias has a target price of $210 on ILMN shares. "While the long-term NGS market penetration story remains in-tact for ILMN, the company is in serious need of an execution streak over the coming quarters. We remain Buy rated, but are removing the stock from our focus list as we see few near-term catalysts that will dramatically reverse sentiment in 1H16," Arias said in a note. Meanwhile, Steve Beuchaw of Morgan Stanley said he is more concerned on clinical slowdown rather than the slowness in Europe. The analyst has an Equal-weight rating and cut the price target by $20 to $140. Beuchaw said ILMN's clinical franchises account for about 20 of sales and comprises more than 50 percent of the company's total available market. However, clinical channel growth for the company is at 20 percent in the first quarter, down from greater than 50 percent in 2014, 40-50 percent in the first half of 2015, and 20-30 percent in the second half of 2015. "Our diligence since new reimbursement rates were finalized in late'15 has found increasing caution in the channel, though this is more specific to the US," Beuchaw noted. In addition, the analyst said concerns in Europe are "no more acute," as his meetings with management of various firms suggest that outside sequencing the slowing in Europe is less significant. Meanwhile, Avondale Partners maintained its Market Perform rating on the stock, but cut the price target to $160 from $175. Shares of ILMN fell 23.72 percent to $135.87.