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Illumina shares target raised, buy rating continued on strong Q3

EditorNatashya Angelica
Published 05-11-2024, 08:32 pm
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On Tuesday, TD Cowen demonstrated confidence in biotechnology company Illumina, with a revised price target on its shares. The firm increased the target to $177.00 from $166.00, while keeping a Buy rating on the stock. This adjustment follows Illumina's third-quarter performance, which showed notable growth in several areas.

The quarter's results were mixed, with certain aspects surpassing expectations and others falling short. Notably, Next-Generation Sequencing (NGS) consumables saw a 7% growth, with the NovaSeq X series outperforming projections. Moreover, the company's service revenue exceeded forecasts, although there was a shortfall in the placement of new instruments.

Illumina's gross margins and EBIT margins outperformed expectations due to a favorable mix and operational expenditure leverage, leading to a 30% earnings per share (EPS) beat. Despite a modest downward revision in the 2024 guidance for instrument sales, the EPS outlook was increased.

TD Cowen highlighted the importance of stronger NGS demand elasticity and significant upcoming gains in margins for Illumina. These factors are considered key areas of focus, suggesting a positive outlook for the company's financial health and stock performance.

In other recent news, Illumina Inc (NASDAQ:ILMN). reported mixed results for the third quarter, with a slight 2% dip in revenue year-over-year. Despite this, the company raised its guidance for both operating margin and earnings per share. The firm's transition from the NovaSeq 6000 to the newer NovaSeq X model has been progressing positively, contributing to an increase in high-throughput consumables revenue.

Several analyst firms have adjusted their price targets for Illumina. Canaccord Genuity maintained a Hold rating, raising the price target to $145. Piper Sandler reaffirmed its Overweight rating with a price target of $195, while Barclays (LON:BARC) and Citi increased their targets to $145 and $190, respectively.

Illumina also announced the acquisition of Fluent (NASDAQ:FLNT) BioSciences and a share repurchase, indicating a strong financial position. Despite reducing its revenue outlook for 2024, Illumina anticipates a return to growth in 2025. These recent developments highlight the company's focus on operational excellence and innovation.

InvestingPro Insights

Illumina's recent performance aligns with several InvestingPro Tips, offering additional context to TD Cowen's positive outlook. Despite not being profitable over the last twelve months, InvestingPro Tips indicate that net income is expected to grow this year, and analysts predict the company will return to profitability. This projection supports TD Cowen's optimistic stance and the increased EPS outlook.

The company's financial health appears solid, with InvestingPro Data showing a gross profit margin of 67.68% for the last twelve months as of Q3 2024, reflecting Illumina's strong pricing power in the NGS market. Additionally, the EBITDA growth of 221.81% over the same period underscores the company's improving operational efficiency, which aligns with TD Cowen's observations on margin outperformance.

Investors should note the strong market performance, with InvestingPro Data revealing a 32.93% price total return over the past three months. This surge in stock price correlates with TD Cowen's increased price target and Buy rating, suggesting market confidence in Illumina's growth trajectory.

For readers interested in a deeper analysis, InvestingPro offers 8 additional tips for Illumina, providing a comprehensive view of the company's financial position and market outlook.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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