Illumina Stock Crashes As Covid, China Hammer Second-Quarter Results

Illumina stock crashed Friday after the DNA sequencer broadly lagged Wall Street’s quarterly forecasts and slashed its outlook for the year.

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The struggles stem from macro challenges, Canaccord Genuity analyst Kyle Mikson said. Illumina (ILMN), whose technology can “read” DNA, is just the latest in a string of medtech companies to note exchange rate headwinds and Covid lockdowns in China impacted second-quarter results.

For Illumina, customers also held off on expanding laboratory equipment and were more conservative in stockpiling inventory during the quarter. Illumina also saw a drawdown in Covid testing revenues, Mikson said in a report to clients.

“Importantly, the company reduced its full-year 2022 guidance ranges, which was driven by the aforementioned factors,” he said.

On the stock market today, Illumina stock plunged 8.4% to 208.32.

Macro Headwinds Slam Illumina Stock

During the June quarter, adjusted Illumina earnings plummeted 70% to 57 cents per share. Earnings also missed forecasts for 64 cents, according to FactSet. Sales came in at $1.16 billion, inching up 3%, but lagging projections for $1.22 billion. In constant currency, sales fell 5%.

“Our second quarter did not meet our expectations as challenges in a complex macroeconomic environment more than offset the growth we continue to see in sequencing runs on our platforms,” Chief Executive Francis deSouza said in a written statement.

Sales of instruments and one-time consumables to run DNA sequencing tests climbed a respective 1% and 6%, said Illumina stock analyst Mikson. Strong shipments of Illumina’s NovaSeq, a DNA sequencing system and interest in cancer tests, drove the results.

On the latter point, revenue from Illumina’s newest cancer test, Galleri, were $12 million. That was a fast ramp, but below expectations, Mikson said. Illumina acquired Galleri, which screens for multiple types of cancer, alongside maker Grail. The buyout is still under regulatory scrutiny.

Mikson kept his buy rating on Illumina stock, but dropped his price target to 380 from 450.

Guidance Slashed Amid Continued Challenges

For the year, Illumina now expects sales to grow 4%-5%, below prior expectations for 14%-16% sales growth this year. That could include $50 million to $70 million from Grail. Illumina stock analysts forecast $65 million from Grail. Illumina previously guided to $70 million to $90 million from Grail.

The company also guided to adjusted earnings of $2.75-$2.90 per share, down from its earlier outlook for $4-$4.20 and analysts’ call for $4.11, UBS analyst John Sourbeer said in his note to clients.

Sourbeer has a neutral rating and 350 price target on Illumina stock.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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