Illumina stock (NASDAQ: ILMN) experienced a 7% increase on June 6, outperforming Mettler-Toledo stock, which was down 1%. This rise can be attributed to Illumina’s decision to spin off its blood testing company – Grail, which it acquired in 2021 despite regulatory hurdles. The company announced that it will proceed with the divestiture of Grail by the end of the month, which is viewed positively by investors as it will allow Illumina to move past the challenges associated with the acquisition. Illumina stock has seen a significant decline of 70% from early 2021 to around $115 currently, while the S&P 500 has increased by about 45% during the same period.
In each of the last three years, Illumina stock has underperformed the broader market, with returns of 3% in 2021, -47% in 2022, and -31% in 2023, compared to the S&P 500, which had returns of 27% in 2021, -19% in 2022, and 24% in 2023. Beating the S&P 500 has been challenging for most individual stocks in recent years, including heavyweights in the health care sector and tech giants like Alphabet, Tesla, and Microsoft. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year during the same period. Illumina’s future performance remains uncertain, given the current macroeconomic conditions, but analysts predict a potential 25% upside from the current stock price.
Illumina’s revenue has increased from $3.2 billion in 2020 to $4.5 billion in 2023 due to the growing demand for gene sequencing. The company’s sales growth has also been driven by its cancer screening and population genomics testing services. Illumina relies on consumables and services for 84% of its total sales, providing a recurring revenue stream. Despite the negative impact of the Grail acquisition on its earnings in recent years, Illumina is expected to see significant bottom-line growth in the coming years, with earnings projected to triple to $2.48 in 2025 from $0.72 in 2024. The company is currently trading at just 4x trailing revenues, compared to the 8x average over the last three years, indicating potential for further growth.
While Illumina stock shows promise for future growth, it is essential to compare the company to its peers to understand its performance relative to the industry. Other comparisons can be found in Peer Comparisons across various sectors. Investors can also consider investing in Trefis Market Beating Portfolios to maximize their returns. Overall, analysts are optimistic about Illumina’s prospects, projecting higher levels for the stock in the near future. With the spin-off of Grail and the expected earnings growth, Illumina is poised for a recovery and potential outperformance in the coming years.
