Why Illumina, Inc. Soared 25% in January

Excitement ahead of the launch of two next-generation gene-sequencing machines sent shares soaring last month.

Todd Campbell
Todd Campbell
Feb 6, 2017 at 4:21PM
Health Care

What happened

Illumina, Inc. (NASDAQ:ILMN) announced the launch of two new gene-sequencing machines on Jan. 9, and the potential for those sequencing machines to reignite demand caused shares to skyrocket 25% last month, according to S&P Global Market Intelligence.

So what

Illumina's 7,500 gene-sequencing machines are used daily to make new discoveries that are reshaping our understanding of genetics, and paving the way for breakthroughs in medicine.

At the J.P. Morgan Healthcare Conference early in January, Illumina surprised investors by announcing that it will roll out the NovaSeq 5000 and NovaSeq 6000 in 2017. Those two machines include technology that can allow researchers to generate more accurate insight into genes more quickly. Illumina's management also indicated that these two machines could eventually help gene-sequencing costs fall from $1,000 to as little as $100. If so, then these systems could unleash a flurry of genetic research that would otherwise remain sidelined because of its cost.

A man sits against a wall with money falling down beside him and a piggy bank.

IMAGE SOURCE: GETTY IMAGES.


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Now what

Historically, launching new gene-sequencing machines has boosted Illumina's sales, profit, and share price. It's anyone's guess whether that happens again this time, but I believe it could, and if I'm right, it may cause a re-acceleration in the company's long-term growth.

Last year, Illumina's shares slumped because of order delays in Europe and the U.S. Management said on the fourth-quarter conference call that shifts in ordering patterns will likely create some headwinds again this year. Nevertheless, the company's guidance for 2017 includes expectations of sales growth of 10% to 12% and profit growth of 8%, both compared to last year, and that's still a healthy forecast.

Because Illumina's shares can be bought for less than they cost in 2015, and new products may energize revenue in the future, investors may want to add shares to their growth portfolios while they're arguably on sale.