Illumina, Inc.’s (ILMN) stock fell over the past six months. The stock underperformed the S&P 500, declining by roughly 40% compared to the S&P 500’s loss of around 12% over the past year. Hedge funds have been actively buying Illumina’s shares, and the stock landed on the WhaleWisdom Heatmap with a rank of seven.
Illumina is a biotechnology company that provides sequencing and array-based solutions for genetic and genomic analysis. Its products and services enable the adoption of genomic solutions in research and clinical settings. Illumina’s customers include a range of government, academic, pharmaceutical, biotechnology, and clinical research institutions worldwide. As part of the biotechnology (biotech) industry, the company faced challenges from the Coronavirus pandemic. The biotech industry was upended when the pandemic hit, as research & development, clinical trials, and travel were initially halted by government mandates and restrictions. Research activities were also impacted by COVID-19 as researchers and research participants became infected with the virus, and new research efforts were developed to study the virus’ genome. Like many other biotechnology companies, Illumina continues to rebound from pandemic disruptions while facing macroeconomic challenges.
Hedge Funds Are Buying
Illumina has the attention of hedge fund managers and institutions. In the third quarter of 2022, the aggregate 13F shares held by hedge funds increased to about 35.2 million from 28.6 million, an increase of approximately 23.4%. Of the hedge funds, 30 created new positions, 75 added to an existing position, 39 exited, and 57 reduced their position. Institutions also added to portfolios and aggregate holdings increased by about 2.9% to approximately 138.4 million from 134.5 million. The long-term 13F metrics between 2005 and 2022 show that Illumina has some ground to regain.
Encouraging Multi-year Earnings
Analysts predict earnings per share will rise, increasing to $3.15 by December 2023, up from an anticipated $2.41 for late December 2022. Strong growth is expected to bring revenue to roughly $5.1 billion by December 2023, up from an estimated $4.6 billion in 2022.
Analysts Adjust Price Targets
There have been mixed responses from analysts due to Illumina’s recent performance. Analyst David Westenberg of Piper Sandler & Co. lowered the firm’s price target on Illumina to $300 from $320 and kept an Overweight rating on shares. Westenberg updated his analysis following missed earnings expectations for the third quarter. Canaccord Genuity Group, Inc. analyst Kyle Mikson lowered the firm’s price target to $330 from $340 and held a Buy rating on Illumina. Analyst Dan Brennan of Cowen & Company, LLC took a different approach to Illumina, swayed by a positive 2023 outlook for Illumina’s new NovaSeq X Systems, which allows large-scale data-intensive sequencing applications. Brennan raised the firm’s price target to $350 from $327 and maintained an Outperform rating on the stock.
Fair Long-Term Outlook
Illumina experienced a challenging year amid market volatility, but there is potential for a rebound. Illumina’s innovative biotechnologies and life science tools continue to be relevant and in demand for global research endeavors. With optimistic earnings estimates through 2023 from analysts, in addition to institutions and hedge funds buying, the stock is one for patient investors.