Analysts weigh in on healthcare stocks Celgene Corporation (NASDAQ:CELG) and Illumina, Inc. (NASDAQ:ILMN) amid the earnings frenzy. While Celgene has yet to report earnings, analysts are already bracing themselves for the impact of FX headwinds. Illumina, on the other hand, has already taken a beating after releasing pre-earnings figures. Let’s take a closer look:
As Celgene prepares to post first quarter earnings on April 28, Credit Suisse analyst Alethia Young lowers her estimates due to foreign exchange headwinds, but remains bullish due to Celgene’s long-term potential. Her first quarter estimates are in-line with the overall consensus, estimating Q1 EPS of $1.29.
Young is lowering her 2017 EPS estimate from $7.50 down to $6.90, and lowering her 2017 revenue estimate from $13.2 billion to $12.8 billion due to foreign exchange headwinds. The analyst explains that her 2017 guidance was set in 2013, and “FX rates have changed substantially” since then. The estimate decrease also comes from a change in hematology and Abraxane sales estimates, noting, “We lowered Abraxane by ~$100M to $1.1B vs. guidance of $1.5-$2B. We think a ’17 Abraxane miss is broadly expected by street but we don’t model further growth decreases from here.”
Looking forward, Young is maintaining her 2020 product sales estimate of $21.2 billion. She notes that management may lower 2017 estimates, but this would “set themselves up well with conservative guidance they could meet or beat based on history of exceeding guidance given.”
Young reiterates an Outperform rating on Celgene, though lowers her price target from $144 to $140 due to foreign exchange headwinds. Despite this near-term difficulty, Young notes that Celgene remains one of her “top picks due to growth quality and number of clinical catalysts 2017 and beyond.”
According to TipRanks, 90% of the analysts covering Celgene are bullish on the stock while 10% are neutral. The average 12-month price target between these analysts is $146.50, marking a 37% potential upside.
Jon Groberg of UBS weighs in on Illumina as shares plummeted more than 23% in trading yesterday, reeling from the company pre-released first quarter earnings earlier this week. The genetic diagnostic company posted about $572 million in sales, below the consensus estimate of $597 million, and lowered full year 2016 revenue guidance from 16% growth down to 12%. The company attributes the misses to lower-than-expected sales of its HiSeq sequencing devices.
Groberg acknowledges that the pre-announcement is “disappointing,” but notes that the company is “increasingly becoming a longer-term story as cycles of revenue acceleration and deceleration increasingly depend on Genomics 2.0 end-market adoption. Thus, while ILMN remains dominant, we also think obvious near-term catalysts remain elusive,” Groberg explains. The analyst is waiting for more details when the company hosts a conference call on May 3.
Despite this disappointing news, the analyst remains optimistic in the company’s long-term value, noting, “We still think ILMN continues to penetrate potentially large markets while also enabling broader adoption of Genomics 2.0 applications, but patience will be needed as ILMN continues to manage its transition from a new-product driven story to a market development story.”
Groberg reiterates a Buy rating on Illumina with a $210 price target.
According to TipRanks, Groberg has a 93% success rate recommending stocks with an average one-year return of 10.1% per rating. Out of the analysts who have rated Illumina in the last 3 months, 33% are bullish and 66% are neutral. The average 12-month price target is $167, marking a 22% potential upside.