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Illumina's Shares Fall on Cautious Outlook

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Shares of Illumina dropped 18 percent in Wednesday afternoon trade after the firm offered a revenue and earnings-per-share forecast that fell below Wall Street expectations.

Last night, after the close of the market, Illumina reported a 36 percent increase in its second-quarter revenues and beat analysts' consensus estimates for both revenues and EPS. However, the firm also offered cautious guidance for the second half of the year, and management cited uncertainty regarding the US budget and academic funding as factors in its expectations.

Though it raised its full-year forecast for revenue growth of between 24 and 26 percent from a previous 20 percent, that range falls short of Wall Street's consensus estimate for 28 percent growth. In addition, its non-GAAP EPS forecast of growth between 33 and 36 percent fell short of analysts' consensus estimate of 43 percent.

Following the firm's conference call and forecast, several analysts published research notes on the firm, cutting their price targets for Illumina's stock and updating their 2011 forecasts for the firm.

Investment bank Baird lowered its price target to $73 from a previous $80 target, while Goldman Sachs analyst Isaac Ro lowered his price target to $76 from $83. Citi analyst Amit Bhalla maintained a $90 price target and a Buy rating.

Among the risk factors for the second half cited by the analysts were the uncertainty surrounding the US budget and the implications for research funding, summer utilization slowdown in Europe, the stability of HiSeq placements, and customer adoption of the MiSeq platform, which currently is being rolled out through an early-access program.

During the conference call last night, however, Illumina CEO Jay Flatley said the firm has already booked 135 orders for the new, lower-cost sequencing system.

"While we believe the risks are real, we continue to remain above guidance as it is unrealistic to us to see the business decline in the midst of a new product launch, priority funding for DNA sequencing, and consistent array performance," Bhalla wrote in a note published today.

Citi is forecasting 29 percent revenue growth for the year with EPS growth of 47 percent.

In late afternoon trading on the Nasdaq, shares of Illumina were trading at $57.10.

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