On Tuesday, Citi has increased the price target for Illumina shares on the NASDAQ:ILMN to $190 from the previous target of $155 while maintaining a Buy rating on the stock. The adjustment follows Illumina's third-quarter earnings report, which aligned with guidance and consensus estimates, showing a revenue of $1.08 billion. The company's growth was primarily fueled by robust sales of consumables.
Illumina's gross margins (GMs) and operating profit margins (OPMs) exceeded market expectations, with GMs reaching approximately 70.5% compared to the FactSet consensus of 68.3%, and OPMs at 22.6%, surpassing the consensus of 19.9%. According to the analyst, these results were driven by a favorable mix of higher-margin consumables sales and productivity initiatives.
The transition from Illumina's NovaSeq 6000 to the newer NovaSeq X model is progressing, as evidenced by the increase in high-throughput (HTP) consumables revenue attributed to the NovaSeq X, which accounted for approximately 35% in the third quarter, up from around 25% in the second quarter.
Despite the company's fourth-quarter revenue guidance being slightly below consensus, Citi's outlook remains positive. The firm highlights Illumina's potential for margin expansion, which was a significant factor in the decision to upgrade the stock in the second quarter. The management's focus on operational leverage is also noted as a contributing factor to the raised price target.
Citi has updated its model for Illumina to reflect the company's performance in the third quarter, which has led to increased confidence in both the company's revenue prospects and its margin outlook.
In other recent news, Illumina Inc (NASDAQ:ILMN). reported mixed results for its third quarter of 2024. The company's revenue stood at $1.1 billion, marking a 2% decrease year-over-year. However, the firm has raised its guidance for both operating margin and earnings per share. Notably, sequencing consumables revenue saw an increase of 7% to $741 million, while instrument revenue fell by 42% to $104 million.
Despite a slight dip in revenue, Illumina acquired Fluent (NASDAQ:FLNT) BioSciences and repurchased shares, with cash and equivalents standing at $939 million. Looking forward, the company expects full-year 2023 revenue to decline by approximately 3%, but has raised its non-GAAP operating margin and diluted EPS guidance for 2024.
InvestingPro Insights
Recent data from InvestingPro aligns with Citi's optimistic outlook on Illumina (NASDAQ:ILMN). The company has shown a strong return over the last three months, with a price total return of 32.93% in that period. This performance is consistent with Citi's decision to raise the price target for Illumina shares.
InvestingPro Tips highlight that Illumina operates with a moderate level of debt, which could contribute to the company's financial flexibility as it continues its transition from NovaSeq 6000 to NovaSeq X. Additionally, analysts predict that the company will be profitable this year, supporting Citi's positive stance on Illumina's future performance.
While Illumina's revenue has seen a slight decline, with a -0.72% growth in the last twelve months, the company maintains a robust gross profit margin of 66.34%. This aligns with the better-than-expected gross margins mentioned in the article, reinforcing the company's ability to maintain profitability despite market challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights on Illumina's financial health and market position. There are 5 more InvestingPro Tips available for ILMN, providing a deeper understanding of the company's prospects and potential risks.
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