Citi Loses Some Confidence In Illumina Following Disappointing Guidance

Illumina, Inc. ILMN preannounced Q3 revenues short of estimates, marking the fourth miss in the last six quarters. The company’s Q4 revenue projection also came in short.

There is no confidence in Illumina’s near-term performance, and “forecasting capabilities have clearly diminished,” Citi’s Daniel Arias said in a report. He downgraded the rating on the company from Buy to Neutral, while reducing the price target from $190 to $140.

Another Miss

Illumina announced its prelim revenue at $607 million, representing 10 percent year-over-year growth, but missing the guidance of $625-$630 million and consensus estimate of $628 million. The company didn't provide the prelim EPS figure.

Although management provided few details, Q3 seems to have been impacted by “weak HiSeq 2500/4000 demand in the US, as well as the drop-out of a multi-system HiSeq X order from one customer,” Arias noted.

Sequencing box sales are expected to have declined 26 percent year-over-year in Q3, while consumables may come broadly in-line with expectations. A HiSeq placement rebound is no longer expected in Q4.

Estimates Lowered

The EPS estimates for 2016, 2017 and 2018 have been reduced from $3.53 to $3.20, from $4.10 to $3.70 and from $4.77 to $4.40, respectively. The analyst commented that there is “a reduced level of confidence in forecasting and execution over the next 12 months.”

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