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Illuminais the $50 billion leading developer of life science tools and integrated systems for large-scale analysis of genetic function and variation. Their technology is responsible for generating more than 90% of the world’s sequencing data.
In October, I chose Illumina for a Zacks Ultimate recommendation with a suggested buy range of $300 to $320. Here are several excerpts from that report to help you see the case for buying ILMN...
The Century of Biology Requires Powertools for Discovery
Ever since the human genome was mapped nearly 20 years ago, an explosion of scientific discovery has been unleashed with many hundreds of public and private companies, universities, and research institutes working to better understand life and cure disease.
According to the National Institute of Health (NIH), the cost to sequence a genome has fallen from $10 million in 2007 to under $1,000 today. And this economic access has fueled the rise of more scientists seeking to do more research that wasn't even thought of a decade ago.
Meet the Queen Isabella of Biotech
When I think of role of this unique tool-maker in "the century of biology," I search for powerful metaphors to describe its reach and impact. If genetics is a great ocean, then Illumina is Queen Isabella of Spain, launching fleets of explorers to discover new worlds.
Once given the exploration, mapping, and conquest tools to do so, explorers would only need more of them to harvest and mine the riches of new lands. And that as we shall see, is exactly what has happened with Illumina's powertools -- the more reach and impact they give genetic explorers, the more exploration that is initiated and, thus, the more demand for its products occurs.
Honestly, I should have bought Illumina for Healthcare Innovators in 2017 when it was trading $200. But I didn't understand the company's impact, much less their valuation trading over 10X 2017 sales of $2.75 billion and 50X EPS of $4.00. Plus, Wall Street's (lazy) analysts underestimated the growth story too, with the average Street price target around $225 at the time.
Then the stock went on a tear this year after a Q1 41% EPS beat in April, launching shares from $240 to $360+ in five months!
Every slight pullback was a tempting opportunity, even at 13-14X sales and 55-60X EPS. And we got a big second chance right before Q2 earnings when the stock got whacked from all-time highs above $315 back down to $290.
But I wasn't fast enough on the research, and the company's 29% EPS beat and raised guidance ignited shares back up to new highs above $325 on July 31. Management raised their 2018 revenue outlook to $3.3 billion and EPS guidance to $5.35-$5.45.
Time to Board the Starship Illumina
Then this September, I really started paying attention to the Illumina story and doing my homework. At over $360 per share, ILMN was trading for over 15X next 12-month's sales (about $3.5 billion) and over 60X EPS (about $6). I told my followers "I don't think you need to rush out and pay that right now."
But I also advised "Long-term healthcare investors should be buyers between $320 and $340. And obviously, you would add on any bigger dips to $280-300 if a market correction of any magnitude should bless you with such an opportunity."
I concluded "The purpose of this report is to put this important company on your watch list so that you are financially and psychologically committed to buying shares when the timing is right."
We obviously got those opportunities to start a position near $320 and add under $300 during the recent volatility and I would still recommend those buy zones.
Who Is Illumina and What Do They Do?
Let's dive into the proprietary technology of Illumina to understand this year's 20% sales growth and 36% EPS advance.
As a California startup in 1998, Illumina was born toward the tail end of the scientific revolution we call the Human Genome Project, an international collaboration of dozens of universities and research centers around the globe. That was the same year that Craig Venter of Celera Genomics started his quest to complete the massive sequencing task faster and cheaper.
Their initial products enabled researchers to explore DNA at an entirely new scale, helping them create the first map of gene variations associated with health, disease, and drug response. With each technological breakthrough, they helped scientists better understand genetic variation at all levels of complexity.
Ever since, Illumina has developed one of the world’s most comprehensive genomics portfolio of integrated systems, consumables, and analysis tools. The company provides a line of products and services that serve the sequencing, genotyping and gene expression and proteomics markets.
Proteomics is the large-scale study of proteins, the basic building blocks of life. According to industry research firm MarketsandMarkets.com, "The global proteomics market is projected to reach $21.87 billion by 2021, at a CAGR of 11.7% from 2016 to 2021... significant growth is propelled by the increasing need for personalized medicine, R&D expenditure, technological advancements, and increased funding for proteomics projects."
Here's how Illumina describes their mission in all of their markets..
"While the rate of progress is accelerating exponentially, we are only beginning to understand the clinical significance of the genome. What causes a cancer cell to mutate? What is the origin of a puzzling disease? Is it possible to prevent the next outbreak? Or safeguard the world’s food supply? These are just a few of the challenges that inspire us to push the boundaries of our imagination.
"We strive to make our solutions increasingly simple, more accessible, and always reliable. As a result, discoveries that were unimaginable even a few years ago are now becoming routine – and are making their way into patient treatment.
"We now have the ability to sequence at an unprecedented scale. Collectively, this will give us a much deeper understanding of genetics than ever before. We will begin to truly unlock the power of the genome. These advances will trigger a fundamental shift in healthcare and beyond. Medicine will continue to become more preventive and more precise. We will be healthier, longer. We have only just begun.
"Our customers include a broad range of academic, government, pharmaceutical, biotechnology, and other leading institutions around the globe."
Douglas Dynamicsis an $850 million designer and manufacturer of snow and ice control equipment for light trucks. Their product lines includes snowplows and sand/salt spreaders and related parts and accessories.
The Milwaukee-based company sells its products under the Western, Fisher and Blizzard brands through a distributor network, primarily consisting of truck equipment distributors located throughout the Midwest, East and Northeast regions of the United States as well as all provinces of Canada.
Douglas Dynamics sells its products primarily to professional snowplowers who are contracted to remove snow and ice from commercial, municipal and residential areas.
The reason this stalwart of winter precipitation navigation is showing up in the cellar of the Zacks Rank is that estimates have slipped recently.
While TTM revenues for the past 5 years have been climbing a moutanin of snow, eclipsing $400 million at the end of 2015, they recently seemed to have peaked at $510 million in the June quarter.
And the company's Q3 report on Nov 5 showed one of the first hiccups in a while with a 4.3% earnings miss.
In the previous 3 quarters, the company surpassed consensus EPS estimates by an average of 38%. Since the miss and growth rate concerns, EPS estimates for 2018 in the past 30 days have fallen from $2.12 to $2.00.
And 2019 full-year estimates have dropped from $2.08 to $1.92.
When I ran snow removal operations for a small airport where I learned to fly in Illinois a few decades ago, the Western hydraulic plow mechanics were essential workhorses on various sizes of plow trucks.
While the growth story may have appeared to peak recently, Douglass remains a key player in professional snow removal equipment.
Since PLOW shares collapsed after their last earnings report, they seem to have found support at the December and February cluster of lows near $37.
This looks like a key place for PLOW bulls to make a stand and eventually profit.
But let's watch the estimates picture as we enter the heart of winter.
If PLOW becomes a buy soon, the Zacks Rank will let you know.
Additional content:
Amazon Boosts Healthcare Presence; How Is Apple Placed?
Amazon’s push to revolutionize the health care industry by minimizing its reliance on traditional methods of tracking patient records is expected to create significant disruption in the space.
The e-commerce giant’s latest service launch, Amazon Comprehend Medical, aids in seamless extraction of medical information related to health condition, medication, dosage and treatment from unstructured data-like test reports, doctor’s notes and audio interviews. The service utilizes robust machine learning (ML) techniques and cloud services to extract the data.
The new service is expected to make the healthcare management process hassle free and time efficient that will significantly benefit the doctors, healthcare providers and patients.
This is likely to help the company in reaping benefits from the solid growth prospects of global healthcare quality management market. Research and Markets expects the market to see CAGR of 15% between 2018 and 2023 and to hit $3.7 billion by the end of the time frame.
Amazon’s Aggressive Stance
The latest move is affirmation of Amazon’s interest in the electronic health records (EHR) market for past several years.
Amazon Comprehend Medical service is approved under the Health Insurance Portability and Accountability Act (HIPAA) which reflects that the company is sincerely dealing with privacy issues and is focused on avoiding security breaches that have been plaguing tech companies of late.
Apart from this service, the company has a healthcare team called Grand Challenge which is focused on projects related to medical records mining and cancer research. Further, the team is working on a project with Amazon Web Services (AWS) called Hera to detect the misdiagnosis of a patient with the help of unstructured data from EHR.
Moreover, Fred Hutchinson Cancer Research Center partnered with Amazon to use the new service in recording the clinical trial results related to cancer studies in order to reduce time taken for analyzing the results.
All these endeavors are likely to help Amazon in rapidly penetrating the global EHR market which as per a report from P&S Market Research, is projected to reach $30.4 billion by 2023 at a CAGR of 5.4% between 2018 and 2023.
Apart from all these, this Zacks Rank #3 (Hold) stock has formed a joint venture with Berkshire Hathaway and JPMorgan Chase to provide enhanced healthcare facilities to its employees. This marks a significant move of Amazon in penetrating the healthcare sector.
Apple’s aggressiveness in penetrating the healthcare market is a headwind for Amazon.
Notably, the iPhone maker updated the Health Record section of its Health application in the beginning of the year by partnering with several health care communities.
This update which is based on FHIR (Fast Healthcare Interoperability Resources) standard enables the iPhone users to access their medical records, lab reports and other crucial information from care providers like hospitals and clinics whenever required.
Moreover, Apple's HealthKit allows third-party apps like Garmin Connect, Nike+ Run Club and others to contribute data to Apple Health. Notably, this app allows the users to access their medical records on their iPhones.
Currently, this Zacks Rank #3 stock is looking into a deal with the US Department of Veterans Affairs to simplify hospital visits and improve care and treatment process for the US veterans by providing them access to their health records on iPhones. This will accelerate healthcare delivery times for the veterans.
With these initiatives, Apple intends to make iOS capable enough for storing and sharing of massive medical data.
Further, the robust Apple Watch wearable series is gaining traction, due to advanced fitness tracking technology. The company’s latest watch, Apple Watch Series 4, has a built-in electrocardiogram (ECG) reader that helps in detecting an atrial fibrillation.
Apple Watch 4, which is U.S. FDA cleared device, is also equipped with a built-in accelerometer and gyroscope that tracks the wrist trajectory and impact acceleration to determine if the wearer has taken a fall.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Illumina, Douglas Dynamics, Amazon, JPMorgan and Apple highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 3, 2018 – Zacks Equity Research Illumina (ILMN - Free Report) as the Bull of the Day, Douglas Dynamics (PLOW - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amazon (AMZN - Free Report) , JPMorgan Chase (JPM - Free Report) and Apple (AAPL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Illuminais the $50 billion leading developer of life science tools and integrated systems for large-scale analysis of genetic function and variation. Their technology is responsible for generating more than 90% of the world’s sequencing data.
In October, I chose Illumina for a Zacks Ultimate recommendation with a suggested buy range of $300 to $320. Here are several excerpts from that report to help you see the case for buying ILMN...
The Century of Biology Requires Powertools for Discovery
Ever since the human genome was mapped nearly 20 years ago, an explosion of scientific discovery has been unleashed with many hundreds of public and private companies, universities, and research institutes working to better understand life and cure disease.
According to the National Institute of Health (NIH), the cost to sequence a genome has fallen from $10 million in 2007 to under $1,000 today. And this economic access has fueled the rise of more scientists seeking to do more research that wasn't even thought of a decade ago.
Meet the Queen Isabella of Biotech
When I think of role of this unique tool-maker in "the century of biology," I search for powerful metaphors to describe its reach and impact. If genetics is a great ocean, then Illumina is Queen Isabella of Spain, launching fleets of explorers to discover new worlds.
Once given the exploration, mapping, and conquest tools to do so, explorers would only need more of them to harvest and mine the riches of new lands. And that as we shall see, is exactly what has happened with Illumina's powertools -- the more reach and impact they give genetic explorers, the more exploration that is initiated and, thus, the more demand for its products occurs.
Honestly, I should have bought Illumina for Healthcare Innovators in 2017 when it was trading $200. But I didn't understand the company's impact, much less their valuation trading over 10X 2017 sales of $2.75 billion and 50X EPS of $4.00. Plus, Wall Street's (lazy) analysts underestimated the growth story too, with the average Street price target around $225 at the time.
Then the stock went on a tear this year after a Q1 41% EPS beat in April, launching shares from $240 to $360+ in five months!
Every slight pullback was a tempting opportunity, even at 13-14X sales and 55-60X EPS. And we got a big second chance right before Q2 earnings when the stock got whacked from all-time highs above $315 back down to $290.
But I wasn't fast enough on the research, and the company's 29% EPS beat and raised guidance ignited shares back up to new highs above $325 on July 31. Management raised their 2018 revenue outlook to $3.3 billion and EPS guidance to $5.35-$5.45.
Time to Board the Starship Illumina
Then this September, I really started paying attention to the Illumina story and doing my homework. At over $360 per share, ILMN was trading for over 15X next 12-month's sales (about $3.5 billion) and over 60X EPS (about $6). I told my followers "I don't think you need to rush out and pay that right now."
But I also advised "Long-term healthcare investors should be buyers between $320 and $340. And obviously, you would add on any bigger dips to $280-300 if a market correction of any magnitude should bless you with such an opportunity."
I concluded "The purpose of this report is to put this important company on your watch list so that you are financially and psychologically committed to buying shares when the timing is right."
We obviously got those opportunities to start a position near $320 and add under $300 during the recent volatility and I would still recommend those buy zones.
Who Is Illumina and What Do They Do?
Let's dive into the proprietary technology of Illumina to understand this year's 20% sales growth and 36% EPS advance.
As a California startup in 1998, Illumina was born toward the tail end of the scientific revolution we call the Human Genome Project, an international collaboration of dozens of universities and research centers around the globe. That was the same year that Craig Venter of Celera Genomics started his quest to complete the massive sequencing task faster and cheaper.
Their initial products enabled researchers to explore DNA at an entirely new scale, helping them create the first map of gene variations associated with health, disease, and drug response. With each technological breakthrough, they helped scientists better understand genetic variation at all levels of complexity.
Ever since, Illumina has developed one of the world’s most comprehensive genomics portfolio of integrated systems, consumables, and analysis tools. The company provides a line of products and services that serve the sequencing, genotyping and gene expression and proteomics markets.
Proteomics is the large-scale study of proteins, the basic building blocks of life. According to industry research firm MarketsandMarkets.com, "The global proteomics market is projected to reach $21.87 billion by 2021, at a CAGR of 11.7% from 2016 to 2021... significant growth is propelled by the increasing need for personalized medicine, R&D expenditure, technological advancements, and increased funding for proteomics projects."
Here's how Illumina describes their mission in all of their markets..
"While the rate of progress is accelerating exponentially, we are only beginning to understand the clinical significance of the genome. What causes a cancer cell to mutate? What is the origin of a puzzling disease? Is it possible to prevent the next outbreak? Or safeguard the world’s food supply? These are just a few of the challenges that inspire us to push the boundaries of our imagination.
"We strive to make our solutions increasingly simple, more accessible, and always reliable. As a result, discoveries that were unimaginable even a few years ago are now becoming routine – and are making their way into patient treatment.
"We now have the ability to sequence at an unprecedented scale. Collectively, this will give us a much deeper understanding of genetics than ever before. We will begin to truly unlock the power of the genome. These advances will trigger a fundamental shift in healthcare and beyond. Medicine will continue to become more preventive and more precise. We will be healthier, longer. We have only just begun.
"Our customers include a broad range of academic, government, pharmaceutical, biotechnology, and other leading institutions around the globe."
Bear of the Day:
Douglas Dynamicsis an $850 million designer and manufacturer of snow and ice control equipment for light trucks. Their product lines includes snowplows and sand/salt spreaders and related parts and accessories.
The Milwaukee-based company sells its products under the Western, Fisher and Blizzard brands through a distributor network, primarily consisting of truck equipment distributors located throughout the Midwest, East and Northeast regions of the United States as well as all provinces of Canada.
Douglas Dynamics sells its products primarily to professional snowplowers who are contracted to remove snow and ice from commercial, municipal and residential areas.
The reason this stalwart of winter precipitation navigation is showing up in the cellar of the Zacks Rank is that estimates have slipped recently.
While TTM revenues for the past 5 years have been climbing a moutanin of snow, eclipsing $400 million at the end of 2015, they recently seemed to have peaked at $510 million in the June quarter.
And the company's Q3 report on Nov 5 showed one of the first hiccups in a while with a 4.3% earnings miss.
In the previous 3 quarters, the company surpassed consensus EPS estimates by an average of 38%. Since the miss and growth rate concerns, EPS estimates for 2018 in the past 30 days have fallen from $2.12 to $2.00.
And 2019 full-year estimates have dropped from $2.08 to $1.92.
When I ran snow removal operations for a small airport where I learned to fly in Illinois a few decades ago, the Western hydraulic plow mechanics were essential workhorses on various sizes of plow trucks.
While the growth story may have appeared to peak recently, Douglass remains a key player in professional snow removal equipment.
Since PLOW shares collapsed after their last earnings report, they seem to have found support at the December and February cluster of lows near $37.
This looks like a key place for PLOW bulls to make a stand and eventually profit.
But let's watch the estimates picture as we enter the heart of winter.
If PLOW becomes a buy soon, the Zacks Rank will let you know.
Additional content:
Amazon Boosts Healthcare Presence; How Is Apple Placed?
Amazon’s push to revolutionize the health care industry by minimizing its reliance on traditional methods of tracking patient records is expected to create significant disruption in the space.
The e-commerce giant’s latest service launch, Amazon Comprehend Medical, aids in seamless extraction of medical information related to health condition, medication, dosage and treatment from unstructured data-like test reports, doctor’s notes and audio interviews. The service utilizes robust machine learning (ML) techniques and cloud services to extract the data.
The new service is expected to make the healthcare management process hassle free and time efficient that will significantly benefit the doctors, healthcare providers and patients.
This is likely to help the company in reaping benefits from the solid growth prospects of global healthcare quality management market. Research and Markets expects the market to see CAGR of 15% between 2018 and 2023 and to hit $3.7 billion by the end of the time frame.
Amazon’s Aggressive Stance
The latest move is affirmation of Amazon’s interest in the electronic health records (EHR) market for past several years.
Amazon Comprehend Medical service is approved under the Health Insurance Portability and Accountability Act (HIPAA) which reflects that the company is sincerely dealing with privacy issues and is focused on avoiding security breaches that have been plaguing tech companies of late.
Apart from this service, the company has a healthcare team called Grand Challenge which is focused on projects related to medical records mining and cancer research. Further, the team is working on a project with Amazon Web Services (AWS) called Hera to detect the misdiagnosis of a patient with the help of unstructured data from EHR.
Moreover, Fred Hutchinson Cancer Research Center partnered with Amazon to use the new service in recording the clinical trial results related to cancer studies in order to reduce time taken for analyzing the results.
All these endeavors are likely to help Amazon in rapidly penetrating the global EHR market which as per a report from P&S Market Research, is projected to reach $30.4 billion by 2023 at a CAGR of 5.4% between 2018 and 2023.
Apart from all these, this Zacks Rank #3 (Hold) stock has formed a joint venture with Berkshire Hathaway and JPMorgan Chase to provide enhanced healthcare facilities to its employees. This marks a significant move of Amazon in penetrating the healthcare sector.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apple a Potent Challenger
Apple’s aggressiveness in penetrating the healthcare market is a headwind for Amazon.
Notably, the iPhone maker updated the Health Record section of its Health application in the beginning of the year by partnering with several health care communities.
This update which is based on FHIR (Fast Healthcare Interoperability Resources) standard enables the iPhone users to access their medical records, lab reports and other crucial information from care providers like hospitals and clinics whenever required.
Moreover, Apple's HealthKit allows third-party apps like Garmin Connect, Nike+ Run Club and others to contribute data to Apple Health. Notably, this app allows the users to access their medical records on their iPhones.
Currently, this Zacks Rank #3 stock is looking into a deal with the US Department of Veterans Affairs to simplify hospital visits and improve care and treatment process for the US veterans by providing them access to their health records on iPhones. This will accelerate healthcare delivery times for the veterans.
With these initiatives, Apple intends to make iOS capable enough for storing and sharing of massive medical data.
Further, the robust Apple Watch wearable series is gaining traction, due to advanced fitness tracking technology. The company’s latest watch, Apple Watch Series 4, has a built-in electrocardiogram (ECG) reader that helps in detecting an atrial fibrillation.
Apple Watch 4, which is U.S. FDA cleared device, is also equipped with a built-in accelerometer and gyroscope that tracks the wrist trajectory and impact acceleration to determine if the wearer has taken a fall.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>
Media Contact
Zacks Investment Research
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support@zacks.com
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.