Illumina stock (NASDAQ: ILMN) saw a 6% rise on Wednesday, July 10, outperforming its peer Mettler-Toledo stock, which only saw a 1% increase. This rise in ILMN stock can be attributed to the company’s acquisition of Fluent Biosciences to expand its single-cell analysis and multiomics offerings. The acquisition was funded with the company’s cash in hand, following the completion of the planned spin-off of Grail last month. Illumina acquired Grail in 2021, despite regulatory concerns and without EU antitrust approval. The recent spin-off of Grail followed by the acquisition of Fluent Biosciences is seen as a positive move for the company. Despite the Grail acquisition causing ILMN stock to decline by 70% from early 2021 levels, the stock is expected to see around 25% upside from its current levels.
In the last three years, ILMN stock has underperformed the broader market, with returns of 3% in 2021, -47% in 2022, and -31% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. Beating the S&P 500 has been challenging for individual stocks in recent years, even for heavyweights in the Health Care sector. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 each year over the same period. As the uncertain macroeconomic environment persists with high oil prices and elevated interest rates, the question remains whether ILMN will continue to underperform or see a recovery. From a valuation perspective, analysts estimate around 25% upside for ILMN stock, with an average price target of $142 compared to the current levels of around $115.
Illumina’s revenue increased from $3.2 billion in 2020 to $4.5 billion in 2023, driven by the growing demand for gene sequencing. The company’s cancer screening and population genomics testing have also contributed to its sales growth. Illumina has a recurring revenue model from consumables and services, accounting for 84% of the company’s total sales in 2023. Despite the impact of the Grail acquisition on its earnings in recent years, the company is expected to see robust earnings growth now that it has spun-off that unit. Analysts project over 5x bottom-line growth for Illumina, with earnings expected to reach $4.72 in 2025 compared to $0.86 in 2023. With the acquisition of Fluent Biosciences, Illumina is poised to gain market share in single-cell analysis, as Fluent’s technology costs around 50% less than its competitor, 10x Genomics.
While ILMN stock shows potential for growth, looking at how Illumina’s peers perform on key metrics is also important. It is advised to consider peer comparisons when evaluating investment opportunities. Illumina’s expansion into single-cell analysis and multiomics through the acquisition of Fluent Biosciences is expected to bolster its market position and contribute to higher revenue growth in the future. Overall, with the Grail story behind them, Illumina is positioned for upward revision to its valuation multiple and potential earnings growth in the coming years. Investors interested in market-beating portfolios can explore various investment options through Trefis.
