The major benchmarks had yet another winning day on Tuesday, although declining issues outnumbered gainers. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both closed at record levels.
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As for individual companies, Illumina (NASDAQ:ILMN) announced a new product and an upbeat outlook for 2018, while e.l.f. Beauty (NYSE:ELF) gave a growth forecast that resulted in an ugly day for the stock.
Illumina rolls out a new instrument and gives strong guidance
Shares of Illumina soared 6.9% after the company announced a new, inexpensive gene-sequencing machine at the J.P. Morgan Annual Healthcare Conference and provided profit guidance for 2018 that exceeded analysts' expectations. Illumina expects 2018 non-GAAP earnings per share to be in the range of $4.50 to $4.60, above the consensus estimate of $4.49.
The iSeq 100 system, which the company had discussed previously under the code name "Firefly," has a list price of $19,900, substantially less than the $50,000 price tag on the company's current low-end sequencer. The benchtop instrument has a run time of 9 to 18 hours and preparing samples costs between $25 and $150.
"For under $20,000, any researcher can have access to the accuracy of an Illumina sequencer in their lab," said CEO Francis deSouza. "The iSeq 100 offers robustness and reliability for a broad range of applications ranging from germline and somatic tumor profiling to 16S microbial analysis and targeted gene expression."
Illumina hit a home run last year when it announced a replacement for its high-end, workhorse product line, which was very successful in 2017. On the other hand, the company's current low-end line, announced two years ago, has had little success, with an installed base of only about 600 units. Illumina thinks the price point of the iSeq 100 attack 50,000 potential customers, but investors will want to see results, and probably were more excited by the EPS guidance today.
e.l.f Beauty lowers expectations
It was an ugly day for investors in e.l.f. Beauty, as the company that specializes in affordable cosmetics for young women lowered its growth outlook for the next two years, and shares fell 11.5%.
In a press release along with a presentation at the annual ICR Conference, e.l.f officials reaffirmed previous guidance for fiscal 2017 revenue to grow 17% to $270 million and adjusted EBITDA growth of 15%. The sticking point for investors was that the company revised its "growth algorithm" for 2016 to 2019 sales and EBITDA from 20% to a range of 10% to 15%. When pressed during the presentation for the reason for lowered expectations, CFO John Bailey blamed category growth, saying it had declined from 3% a year ago to negative low single digits today. He also expressed the view that the contraction is temporary.
The reduced growth outlook follows lowered guidance that the company delivered in its last earnings report. e.l.f. is a relatively new and small entrant to the beauty industry, a segment of the stock market that has generated a lot of investor interest in the last year. Since going public in 2016, the stock has declined despite healthy growth, market share gains, improving gross margin, and appeal to millennials in the era of the selfie. The readjustment of expectations and the market's reaction served to bring the valuation more in line with reality.