Powell’s speech, Nvidia’s chips, Meta deal - what’s moving markets
On Thursday, Piper Sandler reiterated its Overweight rating on Illumina shares (NASDAQ:ILMN), maintaining a $190.00 price target, which represents the highest among analyst targets ranging from $90 to $190. The decision comes after the firm engaged with over a dozen sequencing customers, competitors, and other industry stakeholders, assessing the challenges faced by sequencing companies in the next-generation sequencing (NGS) market. According to InvestingPro data, the stock has seen a significant decline of over 36% in the past six months, with current trading levels near $87.53. According to Piper Sandler, Illumina’s recent stock decline over the past two months accurately reflects the industry’s concerns, which include increased competition and spending freezes, partly due to apprehensions about National Institutes of Health (NIH) funding. InvestingPro data reveals that while the company generates substantial revenue of $4.37 billion and maintains a healthy gross margin of 68.4%, it hasn’t been profitable over the last twelve months. However, analysts tracked by InvestingPro expect the company to return to profitability this year.
Illumina, under CEO Jacob Thayson, is redirecting its research and development efforts to expand beyond sequencing and address a broader range of biological questions. The company has notably boosted its investment in assay content, up from roughly 20% five to six years ago to about 40-45% at present. This strategic shift towards multi-omics, encompassing proteomics, spatial analysis, and single-cell methods, aims to improve the resolution and sensitivity while simultaneously reducing the overall cost of experiments.
Piper Sandler’s $190 price target for Illumina is grounded on an estimated 7x 2026E enterprise value/revenue multiple. This valuation takes into account the company’s cash and equivalents, which are projected at $1,220 million, debt at $2,044 million, and a total of 160 million shares outstanding. InvestingPro analysis indicates the company operates with a moderate level of debt, maintaining a current ratio of 1.78. Piper Sandler also highlighted potential risks for Illumina, including the development of technology, the competitive landscape, product adoption rates, and the reliance on government funding. For a comprehensive analysis of Illumina’s financial health and future prospects, investors can access the detailed Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, Illumina has announced several significant changes to its board of directors. Keith Meister, founder of Corvex Management, is set to join the board, while Scott Gottlieb, M.D., will take over as chairman. These updates come amid Illumina facing challenges such as funding cuts from the National Institutes of Health and restrictions on instrument sales in China. Analyst firms have reacted to these developments with varying outlooks. Bernstein SocGen Group maintained a Market Perform rating with a $130 price target, while Canaccord Genuity held its rating at Hold with a $115 target, reflecting a cautious stance pending stronger financial performance. Evercore ISI reiterated an Outperform rating with a $160 target, emphasizing the potential positive impact of Meister’s board addition. The firm’s analysts suggest that Illumina could improve its communication strategies and explore opportunities in its pipeline, such as proteomics and spatial genomics. These board changes are seen as a strategic move to potentially enhance shareholder value and address the company’s ongoing challenges.
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