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Despite Recent Outperformance, Illumina, Inc. (ILMN) Stock Has Plunged In Last Three Months

By Howard Kim

In the past 3 months, shares of Illumina, Inc. (NASDAQ:ILMN), Inc. have dropped 20 percent. Analysts Dan Leonard and Miroslava Minkova weighed in on the biotechnology company.

On October 1st, Dan Leonard from Leerink downgraded Illumina from Outperform to Market Perform and reduced his price target for the stock to $185 from $225.

As per Leonard, the positives for the company are its long-standing competitive advantage and long-term trends in next-gen sequencing. However, he expressed concerned around the uncertain research market and also about Illumina’s ability to penetrate various diagnostics and consumer applications.

The company’s shares had outperformed the S&P in 2013 (by 70 percent) and in 2014 (around 55 percent). According to Leonard, the reasons behind these outperformances were “two clear, distinct product cycles – the HiSeq 2500 and HiSeq X.”

Recently, Illumina has launched an initial TruSight Tumor 15 oncology test panel. This “research use only” panel has been designed for the identification of sequence variants in 15 cancer genes. The genes have been selected carefully to match the cancer drug therapies presently available in the market.

In the context of this launch, Leonard said, “We further believe the business model in oncology testing, the largest diagnostics market for ILMN, will take time to evolve following last week’s proposed pricing announcements from Medicare. Proposed pricing for oncology panels is below what we would have expected.”

Dan Leonard has a 46% success rate recommending stocks with a 1.1% average return per rating when measured over a one-year horizon and no benchmark.

On September 30th, Miroslava Minkova from Stifle maintained a Buy rating for the stock with a price target of $235. The analyst expects Illumina to generate 15-20 percent revenue growth over the foreseeable future. Minkova added, “We view the shares as a top growth opportunity in Tools & Dx.”

Talking about the launch of the oncology test panel, the analyst said, “We view the launch as an important first step in a potentially very significant ($10B+ TAM) oncology market opportunity for ILMN.” However, Minkova expects the stock to remain volatile in the near term on “sentiment changes.”

Miroslava Minkova has a 67% success rate recommending stocks with a +9.5% average return per rating when measured over a one-year horizon and no benchmark.

As per TipRanks’ statistics, out of 10 analysts who have recently rated Illumina, 8 have rated it as a Buy and 2 have given it a Hold rating, with none of the analysts recommending a Sell. The average consensus 12-month price target for the stock is $236.11, a nearly 50% upside from present levels.