For Illumina, A New Quarter Means A New Narrative ... Again

Shares of Illumina, Inc. ILMN were trading lower by more than 26 percent early Tuesday morning after the company pre-announced its third-quarter results, which fell short of Wall Streets expectations.

Illumina said that it expect its third-quarter revenue to be $607 million, which is short of the $628 million analysts were expecting and short of the company's own guidance of $625 million to $630 million.

Tim Evans of Wells Fargo commented in a research report that Illumina's pre-announcement marks its third disappointing pre-announcement in the past five quarters. The analyst added that it is "even more frustrating" that "the narrative is different every quarter."

Evans continued that in the third quarter of 2015, the company's pre-announcement was based on weak desktop sequencing sales and weakness in Europe and APAC regions. In the fourth quarter of 2015, the company attributed its poor financial results to the materially dilutive GRAIL initiative.

Related Link: Illumina's Poor Streak Is A Sign Of Market Saturation

Moving on, the first quarter of 2016's negative announcement was due to weaker standard HiSeq instrument sales and weakness in Europe. The second quarter of 2016 was actually a "strong quarter" due to arrays, strength in desktop and China and "seemingly good visibility" on HiSeq sales.

Finally, the third quarter's poor announcement is attributed to the expected strength in HiSeq not materializing.

"Our own big picture is that ILMN is experiencing the growing pains of a company transitioning from the mature academic research market to the more nascent but also more challenging clinical market, which we think means slower growth and more limited profitability, all of which should result in multiple contraction," the analyst wrote.

Bottom line, Evans stated that Illumina is a market leader in next-gen sequencing, but future growth in clinical markets will "likely be constrained" by reimbursement and regulatory challenges and these "constraints could result in decelerating growth and multiple pressure."

Shares remain Market Perform rated with a valuation range lowered to $135 to $140 from a prior range of $145 to $155. At last check within the first 30 minutes of Tuesday's regular trading session, shares of Illumina were down 24.51 percent at $139.54.

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