Illumina Downgraded At Mizuho On Negative Pre-Announcement

• Illumina, Inc ILMN shares have been treading a downward path, declining 25 percent in the last three months.
• Mizuho Securities’ Eric Criscuolo downgraded the rating on the company from Buy to Neutral, while reducing the price target from $250 to $150.
• Although the company’s long-term story remains intact, its negative pre-announcements for 3Q and 4Q cannot be ignored, Criscuolo said.

Analyst Eric Criscuolo mentioned that Illumina pre-announced disappointing 3Q revenues, while guiding to 4Q revenues of $570 million, which is $33 million below the Street expectations. The lower guidance was attributable to weakness in desktop instrument sales, particularly NextSeq in Europe.

“While we saw near-term risks around strong comps, we did not expect the magnitude of the pre-announced miss. We still think the long-term story is intact- high volume placements and sequencing consumables appear to remain robust and multiple end-markets are still in their infancy,” Criscuolo wrote.

Illumina continued to underperform in the Asia-Pacific region, the Mizuho Securities report mentioned, while adding that the company now intends to replace its leadership in Japan to address the sluggish growth in the Asian region.

The company reiterated its long-term growth guidance of 15-20 percent. “We feel long-term opportunities remain substantial and attainable across segments (consumer, clinical, pre-natal, drug, development, to name a few),” Criscuolo stated.

The analyst believes that Illumina is on its way to meeting the 2016 revenue target of approximately $2.4 billion and that the management is being conservative by sticking to its original target.

The EPS estimates for 2015 and 2016 have been reduced from $3.51 to $3.38 and from $4.00 to $3.73, respectively.