Why Illumina Stock Fell 12.6% in March


What happened

Shares of Illumina (NASDAQ:ILMN) dipped 12.6% in March, according to data from S&P Global Market Intelligence. The stock lost ground due to negative analyst coverage and a challenge to its acquisition of liquid-biopsy specialist Grail.

ILMN Chart

ILMN data by YCharts

Barclays analyst Luke Sergott published a note initiating coverage on Illumina stock on March 2. The analyst gave an underweight rating to the biotech stock and set a one-year price target of $325 per share, suggesting roughly 27% downside at the time of the note’s publication.

A DNA strand.

Image source: Getty Images.

So what

The Barclays note on Illumina stock acknowledged that the company has a significant opportunity in gene sequencing and management, but indicated that it would face near-term growth issues and was likely overvalued as a result. The coverage corresponded with a significant pullback for the genetics specialist’s share price, and the stock’s valuation was put under additional pressure at the end of the month after the Federal Trade Commission announced it was challenging the company’s planned $7.1 billion acquisition of Grail. 

Now what

Illumina stock has gained ground early in April. The price is up roughly 8% in the month so far thanks to encouraging preliminary first-quarter results. 

ILMN Chart

ILMN data by YCharts.

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Illumina published preliminary first-quarter results on April 5, indicating that it expected revenue of $1.085 billion in the quarter. The average analyst estimate called for $924.6 million in sales in the period. The company also announced that it expected orders in the quarter to be up 28%, reaching a record $1.4 billion.

Illumina has a market capitalization of roughly $60.5 billion and is valued at approximately 15 times this year’s expected sales and 78 times expected earnings. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.




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