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Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
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MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
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West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
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S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
The Ultimate Passive Income Play (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
Critical asset just had biggest fall on record (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Critical asset just had biggest fall on record (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
MILAN FASHION PHOTOS: Ferragamo, Dolce&Gabbana conceal and reveal, balance transparency with cover
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Warren Buffett uses his annual letter to warn about Wall Street and recount Berkshire's successes
The Ultimate Passive Income Play (Ad)
MarketBeat Week in Review – 2/19 - 2/23
A collection of the insights Warren Buffett offered in his annual letter Saturday
Critical asset just had biggest fall on record (Ad)
West Africa bloc lifts coup sanctions on Niger in a new push for dialogue to resolve tensions
West Africa's ECOWAS bloc says it's lifting sanctions imposed on Niger over last year’s coup in a new push for dialogue
Critical asset just had biggest fall on record (Ad)
Macron booed by French farmers who blame him for not doing enough to support agriculture
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Is Illumina Still the Gamechanger in Genomics Sequencing?

Is Illumina Still the Gamechanger in Genomics Sequencing?

Key Points

  • The cost of sequencing a single human genome has fallen from $100 million to $600 since 2001
  • Illumina’s new machines can further drop the cost to under $200
  • Illumina won an antitrust lawsuit with the FTC over its GRAIL acquisition and plans to appeal the EC
  • 5 stocks we like better than Illumina

Genome sequencing solutions company Illumina NASDAQ: ILMN stock has fallen under its pandemic lows. A surprise earnings miss, and lowered guidance has caused shares to spiral down (-49%) for the year. The Company leads the market with its next-generation genome sequencing systems and analysis tools. It has a 90% market share of the global sequencing market with over 17,000 active sequencing machines installed throughout 115 countries. The cost of DNA sequencing has fallen from $100 million per human genome in 2001 to less than $600 today. Illumina’s machines accelerate the advancement of precision medicine applications. While demand was still robust, the macroeconomic uncertainty has caused many of its clients to hold less inventory and delay orders to preserve capital. Molecular diagnostics providers are a key growth driver for the Company. Rising interest rates are having a material impact on Illumina as its customers tend to be rate sensitive causing them to scale back purchases and expenses to preserve precious capital. Some of its clients include Natera NASDAQ: NTRA, Exact Sciences NASDAQ: EXAS, Invitae, and Myriad Genetics NASDAQ: MYGN in addition to clinical labs, pharmaceutical companies, academic institutions, healthcare systems, and hospitals. FX headwinds and supply chain disruptions have had a direct impact on its top and bottom lines. The Company expects the effects to reverberate for the near-term future.


The Grail Acquisition Dilemma

Illumina was challenged by the Federal Trade Commission (FTC) and the European Commission (EC) on its completed $7.8 billion acquisition of GRAIL, a cancer test maker, over antitrust concerns. GRAIL developed Galleri, a blood test that can detect over 50 types of cancers from one blood draw. It’s a powerful early detection tool with a low false-positive and false-negative rate. Most blood tests on the market only detect five types of cancers. Early detection is the first line of preventative care as cancer risk rises with age. It partnered with Fountain Health Insurance to offer Galleri as part of annual wellness benefits. GRAIL partnered with AstraZeneca NASDAQ: AZN to develop companion diagnostic tests to identify high-risk and early stage patients for novel therapies. On Sept. 1, 2022, Illumina won a lawsuit brought by the FTC to unwind the merger. The FTC plans to appeal the decision. Riding the momentum of this court ruling, Illumina plans to appeal the EC’s decision to prohibit the merger. Rumor is that Illumina is in talks with EU antitrust officials over plans to divest GRAIL.

Earnings Shock

On Aug. 11, 2021, Illumina released its fiscal second-quarter 2021 results for the quarter ending June 2022. The Company reported non-GAAP earnings-per-share (EPS) profit of $0.57 versus $0.64 consensus analyst estimates, a (-$0.07) miss. Diluted GAAP EPS was (-$3.40) which included $609 million in legal contingencies. The Company saw revenues grow 3.2% year-over-year (YoY) to $1.16 billion missing analyst estimates for $1.22 billion. Illumina CEO Francis deSouza commented, "Our second quarter results did not meet our expectations as challenges in a complex macroeconomic environment more than offset the growth we continue to see in sequencing runs on our platforms. As we strategically navigate these dynamics, we continue to advance our innovation roadmap in support of our long-term growth trajectory. At our upcoming Illumina Genomics Forum and Investor Day events, we look forward to showcasing our breakthrough technologies that demonstrate the power and potential of genomics."

Is Illumina Still the Gamechanger in Genomics Sequencing?

Here’s What the Charts Say

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for ILMN stock. The weekly rifle chart peaked at the $238.74 Fibonacci (fib) level. Shares collapsed on the Q2 2022 earnings report and commenced its breakdown. The weekly 5-period moving average (MA) resistance is falling at $196.14 followed by the weekly 15-period MA at $200.70. The weekly stochastic peaked and crossed back down just under the 40 band as shares fell through the weekly market structure low (MSL) buy trigger at $194.80. The daily rifle chart is attempting an inverse pup breakdown as shares slip under the daily 5-period MA at $190.02 followed by the falling daily 15-period MA at $195.73. The daily lower Bollinger Bands (BBs) sit at $177.76. The daily stochastic has stalled under the 30-band on the bounce to set up a make or break with the daily MAs attempt an inverse pup versus stochastic attempting a mini pup. Attractive pullback levels sit at the $181.17, $177.62, $170.75 fib, $162.51, $153.42 fib, and the $143.74 fib.

Taking Down Expectations

Illumina slashed it fiscal full-year 2022 EPS to come in between $2.75 to $2.90 from $4.00 to $4.20) versus $4.12 consensus analyst estimates. Full-year revenues are expected to come in between $4.67 billion to $4.72 billion versus $5.21 billion consensus analyst estimates.

The Gamechanger

During its Genomics Forum and Investor Day Sept. 29, Illumina unveiled two NovaSeq X Series products that can process up to 20,000 human genomes annually at 2.5X faster than current machines. This can slash the cost of sequencing to $200 from just under $600. CEO deSouza commented, “This will be a huge force in terms of significantly increasing accessibility to genomics in a number of ways. It will democratize access to genomics by allowing sequencing to be offered to hospitals and researchers at much lower prices.”

 

 

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Should you invest $1,000 in Illumina right now?

Before you consider Illumina, you'll want to hear this.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Illumina (ILMN)
4.7765 of 5 stars
$133.00-1.9%N/A-18.12Hold$166.95
Natera (NTRA)
0.9954 of 5 stars
$70.46-1.0%N/A-15.59Moderate Buy$72.85
Exact Sciences (EXAS)
4.7098 of 5 stars
$57.53-3.3%N/A-50.46Moderate Buy$99.31
Myriad Genetics (MYGN)
3.3766 of 5 stars
$22.72-1.6%N/A-6.76Hold$23.75
AstraZeneca (AZN)
3.5451 of 5 stars
$65.83+2.7%2.93%34.29Hold$80.00
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Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


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