Tuesday, Stephens set a new price target for Illumina (NASDAQ:ILMN), increasing it to $184 from $170 while keeping an Overweight rating on the stock. This adjustment follows the company's third-quarter results for 2024, which were seen as aligning with market expectations.
The report highlighted that, despite ongoing macroeconomic pressures affecting instrument revenue, especially in the mid-throughput sector, Illumina's NovaSeq X shipments exceeded projections. Notably, the cumulative revenue for NovaSeq X surpassed the $1 billion threshold during the quarter.
The company's sequencing consumables revenue exhibited a year-over-year growth of 6.6%, propelled by rising demand for NovaSeq X consumables. While Illumina has reduced its revenue outlook, it simultaneously raised its operating margin and earnings per share (EPS) guidance, suggesting potential for increased operating leverage as revenues grow.
Stephens has moderated its revenue forecasts for Illumina but has increased its EPS estimates. Looking ahead to the fiscal year 2025, the firm anticipates that recent product launches and diminishing headwinds from the transition to newer models, such as the 6000 and X series, will likely accelerate growth for Illumina.
In the analyst's words, "ILMN reported 3Q24 results that we'd view as relatively in line with buyside expectations... Revenue guidance was lowered, but operating margin and EPS guidance were increased, highlighting the operating leverage opportunity as the top line moves higher.
Looking into FY25, we believe new/recent product introductions and the moderating headwinds associated with the 6000/ X transition should help growth accelerate." The endorsement of an Overweight rating and the price target increase to $184 from $170 reflect this positive outlook.
In other recent news, Illumina has been the subject of several analyst revisions following their third-quarter financial results. Morgan Stanley (NYSE:MS) resumed coverage on Illumina, assigning an Equalweight rating and setting a stock target of $156.00. The firm acknowledged the resolution of issues with GRAIL and the setting of long-term targets combined with a push for efficiency. In contrast, Baird maintained a Neutral rating but raised the price target to $139.00. TD (TSX:TD) Cowen held a Buy rating, increasing the price target to $177.00, while Piper Sandler maintained an Overweight rating, keeping its price target at $195.00.
Illumina's third-quarter revenue met consensus estimates, with an upside in both margins and earnings per share (EPS). However, the company revised its full-year 2024 revenue growth outlook downward due to challenging macroeconomic conditions. Despite this, Illumina anticipates a return to growth in 2025. The transition from the NovaSeq 6000 to the newer NovaSeq X model has been positive, contributing to an increase in high-throughput consumables revenue.
The company also announced the acquisition of Fluent (NASDAQ:FLNT) BioSciences and a share repurchase, indicating a strong financial position. Despite a 2% year-over-year decrease in third-quarter revenue, Illumina raised its guidance for both operating margin and earnings per share.
InvestingPro Insights
Illumina's financial landscape, as revealed by InvestingPro data, offers additional context to Stephens' analysis. Despite a slight revenue decline of 1.68% over the last twelve months, the company maintains a robust gross profit margin of 67.61%, indicating strong pricing power in its core business. This aligns with Stephens' observation of the company's ability to increase operating margin guidance despite lowering revenue outlook.
InvestingPro Tips highlight that Illumina's net income is expected to grow this year, and analysts predict the company will be profitable. This supports Stephens' increased EPS estimates and the anticipated acceleration in growth for fiscal year 2025. Additionally, the strong return over the last three months and the large price uptick over the last six months, as noted by InvestingPro, reflect the market's positive reception of Illumina's recent performance and future prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Illumina, providing a deeper understanding of the company's financial health and market position.
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