On Monday, UBS adjusted its financial outlook for biotechnology firm Illumina, Inc. (NASDAQ:ILMN), reducing the price target to $131 from the previous $145 while maintaining a Neutral rating on the company's shares. The revision reflects a cautious stance on the company's current transition phase, marked by both structural challenges and growth opportunities.
Illumina, known for its genomic sequencing technologies, is in the midst of efforts to improve its earnings by committing to margin restoration. However, UBS notes that it is still early to gauge the effectiveness of these initiatives. The firm also points out that the sales forecasts by other analysts appear overly optimistic when compared to UBS estimates, which are set at $4.6 billion for 2025 and $4.8 billion for 2026, according to data from VisibleAlpha.
The price target of $131 is based on an enterprise value that is approximately 16.5 times the company's trailing 12-month EBITDA as of June 26, which is slightly below the median multiple of 17.5 times EV/EBITDA for the peer group in the Tools industry. This valuation reflects UBS's anticipation of Illumina's organic sales growth being at the lower end of the 4% to 6% range projected for the industry from 2025 to 2028.
Furthermore, UBS has updated its adjusted earnings per share (EPS) forecasts for fiscal years 2024 and 2025 to $3.85 and $4.72, respectively, from previous estimates of $0.59 and $1.41. This update takes into account the financials of Illumina following its recent divestitures, indicating an expectation of improved profitability in the c coming years.
In other recent news, Illumina, a biotechnology firm, has seen significant changes in its corporate landscape. The company recently announced its decision to spin off GRAIL, a healthcare subsidiary specializing in cancer screening. This move comes after intense regulatory scrutiny and challenges, and is expected to result in Illumina retaining a 14.5% stake in GRAIL.
The divestment has led to various reactions from analysts. Baird has reduced Illumina's price target to $119, maintaining a neutral rating due to lingering concerns about the company's revenue guidance for 2024. Evercore ISI, while reducing Illumina's price target to $175, maintains an Outperform rating, forecasting a standalone earnings per share (EPS) of over $4.50 for fiscal year 2025. Canaccord Genuity, on the other hand, has maintained a Hold rating on Illumina's shares, acknowledging the positive step of GRAIL's separation but noting uncertainty in GRAIL's valuation.
Following the spin-off, GRAIL is set to debut independently on the Nasdaq stock exchange, focusing on its flagship cancer-detection test, Galleri. The company has already established over 100 commercial partnerships and is conducting extensive clinical trials for U.S. Food and Drug Administration approval.
InvestingPro Insights
In light of UBS's price target adjustment for Illumina, Inc. (NASDAQ:ILMN), current data from InvestingPro provides additional context for investors considering the company's financial health and market position. With a market capitalization of approximately $17.01 billion and a negative P/E ratio reflecting investor concerns about profitability, Illumina's financial outlook presents a complex picture. Notably, the company's recent revenue growth has been modest at 1.01% over the last twelve months as of Q1 2024, with a slight quarterly decline of 1.01% in Q1 2024. Gross profit margins remain strong at 65.72%, underscoring the company's ability to maintain profitability at the operational level despite broader challenges.
InvestingPro Tips suggest that net income is expected to grow this year, a sentiment echoed by analysts who have revised their earnings upwards for the upcoming period. While Illumina does not pay dividends, indicating a reinvestment of profits into the business, the company operates with a moderate level of debt, which may offer some financial flexibility. The anticipation of profitability this year could signal a turning point for Illumina as it navigates its transition phase.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available for Illumina. By using the coupon code PRONEWS24, you can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to in-depth insights that could inform investment decisions. Visit https://www.investing.com/pro/ILMN for further details and to explore the full range of expert tips.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.