William Blair Reiterates Outperform on Illumina, Inc. (ILMN) Despite Weak Outlook for Revenue

In a research report released Wednesday, William Blair analyst Amanda Murphy reiterated an Outperform rating on shares of Illumina, Inc. (NASDAQ:ILMN), following the company’s preliminary revenue results for the third-quarter. The company is expecting third quarter revenue of $550 million, below consensus estimates of $569 million.

Murphy noted, “While management reiterated its confidence in its revenue growth estimates of 15% to 20% in 2016, we had assumed investors would take a more bearish view on growth/margin leverage after the preannouncement. This led us to a back-of-the envelope EPS estimate of just about $4.00 in 2017. We have revised our model, which is based on a bottom-up revenue approach, and are left with an EPS estimate that is not quite as bearish at $4.22 in 2017 (but below our prior estimate of $4.78).”

“While we are biased to the positive, to see multiple expansion from here or confidence in more bullish EPS targets, we believe investors may need to see: 1) the full earnings report (provided on October 20), which will provide insights into margins, and 2) evidence that weakness in desktop sales is not an indication of a more pervasive instrumentation slowdown that could ultimately roll into the X Ten and HiSeq as we get farther into those product cycles,” the analyst concluded.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Amanda Murphy has a total average return of 0.2% and a 45.5% success rate. Murphy has a 5.6% average return when recommending ILMN, and is ranked #2418 out of 3772 analysts.

Out of the 16 analysts polled by TipRanks, 11 rate Illumina stock a Buy, while 5 rate the stock a Hold. With a return potential of 55.1%, the stock’s consensus target price stands at $217.77.

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