Canaccord Genuity Cuts Price Target on Illumina (ILMN) to $135 Following Weak 3Q Preannouncement
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Canaccord Genuity maintained a Hold rating on Illumina (NASDAQ: ILMN), and cut the price target to $135.00 (from $165.00), following the company's 3Q preannouncement. After the close, ILMN preannounced revenues of ~$607M, ~$21M below the Street's $628M and the $625-630M guide. ILMN did not report adjusted EPS but the revenue shortfall implies EPS of $0.87, below the Street's $0.91 estimate.
Analyst Mark Massaro commented, "We expect ILMN to be off ~20%+ at the open after the company preannounced another large quarterly miss, and guided a very weak Q4. This evening we spoke to the company, who is still searching for answers to explain the miss, but does know the weakness was driven by a shortfall in the US from its 2500/4000 line, followed by one fewer HiSeq X system deal (an X5 or an X10), likely from China, in our view. While the preannounced Q3 shortfall is discouraging, the weak Q4 is troubling, especially since it is US-related and not China-related. What's more, we remain chiefly concerned about 2017 and 2018 growth as well as spending, "bridge years" before the company gets to Grail, if that launches in 2019 (we are not convinced of that, either). Trading at the loftiest valuation among its peers in the space, a reset in its multiple is sensible. We lower our PT to $135, which assumes a ~33x P/E multiple (from ~40x) on our 2017 Adj. EPS of $4.05. We will update our model after ILMN reports its full Q3 results on November 1st."
Shares of Illumina closed at $184.85 yesterday.
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