Illumina Tanks in anticipation of a decline in revenues



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Forecasts of reduced income

Yesterday, Illumina (ILMN), the leader in the genome sequencing segment, released its second-quarter revenue forecast of $ 835 million, up almost 1% year-over-year. This performance is not only lower than the forecast of 7% year-over-year revenue growth provided by the company at the call of the first quarter results, but also lower by 3 million USD at the end of the year. Estimate of consensus.

According to the press release on the second quarter revenue forecast, Illumina recorded a revenue decline of approximately $ 30 million due to the delay in closing orders for sequencing systems and consumables for some population genomics initiatives. These orders are now expected to be completed by the end of 2019. In addition, Illumina reported lower forecast revenue of $ 10 million due to lower than expected shipments of its sequencing and high-throughput consumables systems. The company also announced a $ 10 million decrease in revenues due to the weakness of DTC (direct sales to consumers) marketing, particularly in multi-device services.

In its press release relating to the second-quarter revenue forecast, Illumina also revised its year-over-year revenue growth rate for the 2019 fiscal year, which was previously expected to 13% -14% to 6%. The company expects revenues to remain under pressure due to weaknesses in DTC marketing, lower-than-expected ramp-up of some population genomics initiatives, and weaker demand for sequencing systems. high-speed consumables.

Course movements

Prior to the announcement, Illumina shares closed at $ 363.66 yesterday, 2.42% lower than the previous closing. The decline has continued today and the company is already down 15.57% to $ 307.00. Today, Bank of America Merrill Lynch has also lowered the rating of its action from "buy" to "underperforming".

Why do investors panic?

The dramatic fall in Illumina's shares primarily reflects investor concerns about downward revisions to revenue forecasts across all lines of business.

In its press release relating to the second-quarter revenue forecast, Illumina revised down the revenue growth rate of its sequencing business for the previous fiscal year 2019, which was previously from 12% to 10%, while the business growth forecast of the sequencing consumables business has been reduced from 20% to 15%. The Company now expects its Bay operations to experience a 14% year-over-year decline in sales compared to the previous year's previously forecast zero performance. Learn more about the businesses. of Illumina, please see Sequencing of the genome: Illumina's main activity.

All this bad news was a shock to investors after a particularly strong performance in the first quarter: Illumina exceeded $ 7.3 million estimate of consensus revenue and $ 0.25 estimate of the BPA consensus. The company traded at a downstream price of 47.41x, a PE of 63.06x and a PEG (PE at growth) of 2.97x. These high multiples are mainly perceived for high growth stocks. Concerns over the company's growth trajectory are prompting investors to question fundamentals supporting high valuation multiples.

The 16 analysts who follow Illumina have an average target price of $ 330, which is lower than the company's closing price yesterday.

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