Illumina Inc

+1.84 (+0.84%)
4:51:42 PM EDT: $221.61 0.00 (0.00%)
StockTwits Share  Twitter Share  Facebook Share

This Stock May be Biotech's Greatest Marvel



We could make an argument that Illumina is the single best stock to own to gain exposure to the biotechnology sector. The stock price has fallen hard from its all-time highs in the wave that has carried the entire market down but its core fundamentals continue to be overwhelmingly strong. 85% of revenues come from product sales while the remaining revenue stream comes from services. The public knows little about this company, but in a wonderfully written piece by Luke Timmerman from Forbes, he writes, "Just as Intel INTC became the company that sparked so much of the computer revolution, Illumina has risen to prominence as a driver of the genomics revolution." That's high praise, and better yet, it's true.

In an article written by Trey Thoelcke we get this: "The driving thematic force behind Illumina is that it is the leader in genetic sequencing and array-based solutions and the company is leading in the race toward genetic analysis for personalized medicine." ILMN makes the tools that allow biotechs and pharmas to do their drug trials and get approvals. The company actually makes the machines that sequence genomes, so the company is the very backbone of all other biotech/pharmas hurrying to detect various illnesses or irregularities through DNA-based technology. It's almost impossible to get too excited about the firm's success so far and potential future. Of course, stock prices can get ahead of themselves, but the company itself is in fact a marvel.

Further, ILMN just completed the acquisition of GenoLogics Life Science Software. GenoLogics has already been adopted by more than 120 genomic labs worldwide, and its Clarity LIMS software strengthens ILMN's industry leading portfolio of genetic analysis solutions. ILMN also focuses growth in reproductive and genetic health and oncology. The company has placed a lot of weight and had a lot of success with strategic partnerships including AstraZeneca, Janssen and Sanof. But perhaps its most exciting recent partnership is with Merck (MRK) to start developing an oncology diagnostic.

When I say that the fundamentals are strong, I mean literally stronger than any company in the biotech, pharma, life sciences segment with am market cap between $5 billion and $50 billion (that's 35 companies). Here are the scan results for only the five star companies.

Click Here to Do Your Own Scan

ILMN Revenue has risen 28% year-over-year and 63% over two-years. At the same time, operating margins are rising, net income is rising, levered free cash flow is rising and R&D expense is rising.

Here are the fundamentals driving the five star rating.

Gottlieb Risk Factor  

ILMN has neither elevated nor depressed stock price movement potential over the next 30-days (movement up or down).

    The stock price range reflected by the option market over the next 30-days is ($177.70, $213.20).

Technicals   |   Support: 189.64   |   Resistance: 201.94   

Swing Death Cross Alert: The short-term 10 day MA is now below the 50 day MA.

ILMN has a one bull (lowest rated) technical rating because it's trading below the 10-day (short-term), 50-day (medium-term) and 200-day (long-term) moving averages.

I remind all readers that a report just like this one is available for any company for free on No e-mail. No login. Free. Forever. Period.

ILMN is down -6.4% over the last three months and down -0.3% over the last six months. The stock price is up +9.9% over the last year.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with regression channel and 10-day momentum (on the bottom).
Click here to interact with this stock chart

Now let's examine the visualizations of the critical financial measures.

Revenue (TTM US$ Millions) 2,0711,6121,272

Revenue (TTM) is trending higher meaning that it has increased for at least five consecutive quarters (we can see the trend in the chart below the analysis).

Note that ILMN is growing revenue by 28.4% year-over-year. Any number over 20% has an added impact on the fundamental (star) rating.

Revenue (TTM) is trending higher meaning that it has increased for at least five consecutive quarters (in this case twenty consecutive quarters). ILMN revenue is up over 28% y-o-y and over 60% in two-years. It continues to make all-time highs and shows no signs of slowing... at all. What do all these numbers mean?
ILMN's fundamental rating benefited these results:
1. The one-year change was positive.
2. The one-year change was greater than +20% (an extra boost to the rating).
3. The two-year change was positive.
Finally, the up trend (consecutive quarters) in revenue benefited the fundamental (star) rating.

Let's look at Revenue (TTM US$ Millions) in the chart below.

Click Here to Interact With This Chart

Net Income (TTM US$ Millions) 486219115

Net Income (after tax profit) over the trailing twelve months (TTM) for ILMN is trending higher, up seven consecutive quarters, with six of those breaking all-time highs. Net income is up an astonishing 122% year-over-year.

In our next chart we plot Net Income (TTM US$ Millions) in the blue bars.

Click Here to Interact With This Chart

Research and Development (US$ Millions) 968368RISING

Research and Development (US$ Millions) in the most recent quarter for ILMN was $96 million which is not only an all-time high, but a 165 rise year-over-year. R&D is up nearly 42% over the last two-years. As the company keeps innovating and growing we would expect to see R&D rising as well. Given that earnings are at all-time highs, the R&D expense rise here could be considered quite bullish as it does not feel out of control or desperate, but rather directed and focused toward the future.

R&D per dollar of revenue for the latest quarter is $0.178. Last year this measure was $0.185 (it's falling).

In our final time series chart we plot Research and Development (US$ Millions) in the blue bars.

Click Here to Interact With This Chart

With the addition GenoLogics, ILMN has become even yet more powerful. In the age of the biotech boom, where companies like Gilead, Celgene, Biogen, Alexion, Jazz and so many others are changing the world with cures for horrible diseases and afflictions, ILMN stands in the center. If the biotech boom today is the the rail road boom during the industrial revolution and the biotechs are the rail road companies, then ILMN is the steel that lines the rail road tracks.

Revenue, earnings and R&D are at all-time highs. The company is making deeper inroads to dominating its market with long-term powerful strategic partnerships. The stock is well off of its highs. Illumina is, in many ways, a marvel.