Illumina (ILMN) stock witnessed a significant drop on Friday following the cut in its outlook by the DNA-reading giant amidst mounting macro pressures faced by life sciences tools companies.
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For the full year, Illumina’s projected shipping of its NovaSeq X instruments has been reduced to just 330 to 340 million from its previous forecast of 390. The NovaSeq X, introduced in September 2022, was lauded for its capacity to sequence over 20,000 genomes in a year.
However, customer demand has not met the original expectations, leading to prolonged sales cycles, as reported by Canaccord Genuity analyst Kyle Mikson.
“The decrease in placement expectations is relatively alarming, in our view, after a seemingly strong start to the launch of a product which the company believes will drive long-term growth,” he mentioned in a report. “Given the near-term macroeconomic challenges, Illumina lowered its 2023 guidance metrics.”
In afternoon trading on the stock market today, Illumina stock plummeted by 9.3% to approximately $97.
Illumina Stock: Launch Slowdown
Mikson observes that the rollout of NovaSeq X seems to be slowing down, with shipments reducing from 109 to 97 between the second and third quarters.
“However, due to lengthened sales cycles among customers, Illumina expects a further decline in placements,” he added.
These variables led to modest sales growth and adjusted earnings exceeding expectations but missing sales projections, according to FactSet. Analysts projected 14 cents, while Illumina guided to 10-15 cents.
“Every tools company so far has guided down and is pointing to flat to low single-digit outlook for fiscal year 2024,” said Evercore ISI analyst Vijay Kumar.
Grail Headache Continues
In addition to its financial challenges, Illumina is encountering obstacles with its acquisition of Grail. European regulators have ordered the company to divest Grail, a cancer detection test maker, despite its completion of the acquisition, leading to uncertainty about its future growth.
“With $64 billion of market cap gone from the August 2021 peak, we think that one statement should get many investors reengaged with Illumina,” said RBC Capital Markets analyst Conor McNamara.
However, despite the uncertain growth prospects, analysts are still optimistic about Illumina’s market position, with some lowering their price targets but maintaining an outperform rating on the stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
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