NEW YORK (GenomeWeb) – Following Illumina's miss on the consensus Wall Street estimate for its revenues, investment bank Janney Montgomery Scott today downgraded shares of the firm to a Neutral rating from a previous Buy rating.
"With revenue growth decelerating, we see limited expansion to the 50.4X" price/earning multiple for Illumina in 2017, analyst Paul Knight wrote in a research note. He maintained the fair value of Illumina's shares at $240.
On Tuesday, Illumina reported revenues of $539.4 million for the second quarter, a 21 percent increase year over year but short of the analyst average estimate of $541.8 million.
In his note, Knight noted concerns about both Illumina's sequencing and microarray businesses. While Illumina's sequencing revenues grew a "robust" 28 percent year over year and Knight estimated a 23 percent to 27 percent growth rate for the remainder of the year, some have suggested that long-term growth in the whole-genome sequencing space will slow as researchers move to application-specific methods.
"The sequential slowdown in [Illumina's] instrument growth lends credence to this viewpoint and the robust growth seen in clinical/translational medicine and oncology further supports a shifting demand," Knight wrote. "We believe this dynamic deserves further inspection for [Illumina's] investors."
Meanwhile, Illumina's microarray business fell in the double digits. "We expected a better performance from the array segment," Knight said.
In afternoon trading Illumina's shares were down 8 percent to $217.85 on the Nasdaq.