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Why You Should Hold on to Illumina (ILMN) Stock for Now
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Illumina, Inc. (ILMN - Free Report) has been gaining from sequential segmental growth and increased demand for products. The company’s focus on partnerships and worldwide expansion to drive growth are expected to contribute further. However, stiff competition and a tough funding environment remain concerns.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 86.9% compared with the industry’s growth of 25.7% and S&P 500’s 66.9% rise.
The renowned life sciences company — which has a market capitalization of $61.29 billion — provides tools, and integrated systems for analysis of genetic variation and function. Illumina projects 7% growth over the next five years and expects to maintain segmental performance. It surpassed estimates in three of the trailing four quarters and missed the same once, with the average earnings surprise being 12.39%.
Let’s delve deeper.
Strong Q4 Results: Illumina’s impressive fourth-quarter 2020 results instil investor confidence in the stock. The gradually improving business conditions buoy optimism on the stock. Sequential improvement in segmental revenues across most geographies looks impressive as well. Additionally, robust adoption of NovaSeq 6000 v1.5 reagents to enhance deeper genomic discoveries looks impressive.
Strategic Partnerships: Illumina’s expansion strategy also buoys optimism. The company — in January 2021 — announced its collaboration with renowned investment firm, Sequoia Capital China, to catalyze the startup ecosystem in China with the launch of the Sequoia Capital China Intelligent Healthcare Genomics Incubator, powered by Illumina. In the same month, Illumina announced new and expanded oncology partnerships with Bristol Myers Squibb, Kura Oncology, Myriad Genetics and Merck to advance comprehensive genomic profiling.
Again in January, the company announced its entry into a partnership with renowned population genomics company, Helix, to enhance national surveillance infrastructure in the United States to track the emergence and prevalence of novel strains of SARS-CoV-2 UK Variant (B.1.1.7).
Worldwide Expansion to Drive Growth: We are upbeat about improvement in Illumina’s EMEA revenues in the fourth quarter of 2020 due to strong instrument revenues from NovaSeq. Revenues from Greater China (which includes China, Taiwan and Hong Kong) surged both sequentially and year over year, partly driven by growing demand in hospitals. Notably, Greater China had its highest sequencing instrument revenue quarter since 2017. Revenues from APJ (Asia Pacific and Japan) were also strong, both on a sequential and year-over-year basis.
Downsides
Stiff Competition: Illumina operates in a highly competitive market, with several biggies already enjoying significant market share, intellectual property portfolios and favorable regulatory developments. To gain a competitive edge, Illumina must upgrade its organization and infrastructure appropriately, as well as develop products with superior throughput, cost and accuracy.
Tough Funding Environment: The timing and amount of Illumina’s revenues from customers that rely on government and academic research funding may vary significantly due to various factors. This may lead to significant uncertainty concerning government and academic research funding worldwide. Budgetary pressures may further result in reduced allocations to government agencies that fund research and development activities, such as the U.S. National Institute of Health. Any shift in the funding of life sciences research and development or delays surrounding the approval of government budget proposals may cause Illumina's customers to delay or forego product purchases.
Estimate Trend
Illumina has been witnessing a negative estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 21.5% south to $5.37.
The Zacks Consensus Estimate for first-quarter 2021 revenues is pegged at $928.2 million, suggesting an improvement of 8.1% from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space include Hologic, Inc. (HOLX - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Abbott Laboratories (ABT - Free Report) .
IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.
Abbott’s long-term earnings growth rate is estimated at 14.1%. The company presently carries a Zacks Rank #2.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Why You Should Hold on to Illumina (ILMN) Stock for Now
Illumina, Inc. (ILMN - Free Report) has been gaining from sequential segmental growth and increased demand for products. The company’s focus on partnerships and worldwide expansion to drive growth are expected to contribute further. However, stiff competition and a tough funding environment remain concerns.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 86.9% compared with the industry’s growth of 25.7% and S&P 500’s 66.9% rise.
The renowned life sciences company — which has a market capitalization of $61.29 billion — provides tools, and integrated systems for analysis of genetic variation and function. Illumina projects 7% growth over the next five years and expects to maintain segmental performance. It surpassed estimates in three of the trailing four quarters and missed the same once, with the average earnings surprise being 12.39%.
Let’s delve deeper.
Strong Q4 Results: Illumina’s impressive fourth-quarter 2020 results instil investor confidence in the stock. The gradually improving business conditions buoy optimism on the stock. Sequential improvement in segmental revenues across most geographies looks impressive as well. Additionally, robust adoption of NovaSeq 6000 v1.5 reagents to enhance deeper genomic discoveries looks impressive.
Strategic Partnerships: Illumina’s expansion strategy also buoys optimism. The company — in January 2021 — announced its collaboration with renowned investment firm, Sequoia Capital China, to catalyze the startup ecosystem in China with the launch of the Sequoia Capital China Intelligent Healthcare Genomics Incubator, powered by Illumina. In the same month, Illumina announced new and expanded oncology partnerships with Bristol Myers Squibb, Kura Oncology, Myriad Genetics and Merck to advance comprehensive genomic profiling.
Again in January, the company announced its entry into a partnership with renowned population genomics company, Helix, to enhance national surveillance infrastructure in the United States to track the emergence and prevalence of novel strains of SARS-CoV-2 UK Variant (B.1.1.7).
Worldwide Expansion to Drive Growth: We are upbeat about improvement in Illumina’s EMEA revenues in the fourth quarter of 2020 due to strong instrument revenues from NovaSeq. Revenues from Greater China (which includes China, Taiwan and Hong Kong) surged both sequentially and year over year, partly driven by growing demand in hospitals. Notably, Greater China had its highest sequencing instrument revenue quarter since 2017. Revenues from APJ (Asia Pacific and Japan) were also strong, both on a sequential and year-over-year basis.
Downsides
Stiff Competition: Illumina operates in a highly competitive market, with several biggies already enjoying significant market share, intellectual property portfolios and favorable regulatory developments. To gain a competitive edge, Illumina must upgrade its organization and infrastructure appropriately, as well as develop products with superior throughput, cost and accuracy.
Tough Funding Environment: The timing and amount of Illumina’s revenues from customers that rely on government and academic research funding may vary significantly due to various factors. This may lead to significant uncertainty concerning government and academic research funding worldwide. Budgetary pressures may further result in reduced allocations to government agencies that fund research and development activities, such as the U.S. National Institute of Health. Any shift in the funding of life sciences research and development or delays surrounding the approval of government budget proposals may cause Illumina's customers to delay or forego product purchases.
Estimate Trend
Illumina has been witnessing a negative estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 21.5% south to $5.37.
The Zacks Consensus Estimate for first-quarter 2021 revenues is pegged at $928.2 million, suggesting an improvement of 8.1% from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space include Hologic, Inc. (HOLX - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Abbott Laboratories (ABT - Free Report) .
Hologic’s long-term earnings growth rate is estimated at 15.4%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.
Abbott’s long-term earnings growth rate is estimated at 14.1%. The company presently carries a Zacks Rank #2.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>