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Tim Smith
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Illumina, Inc. (ILMN) shares surged nearly 12% Friday after the diagnostics company disclosed a better-than-expected quarterly report on the back of robust growth in its sequencing consumable business.

The healthcare giant reported a fourth-quarter (Q4) profit of $1.22 per share, surpassing analysts’ forecasts of $1.11 a share. However, the bottom line declined almost 30% from a year earlier. Meanwhile, revenues of $953 million during the period grew 20% sequentially and came in comfortably ahead of the $898 million consensus mark. Sales in the company’s sequencing consumable segment rose to $599 million, up 4.7% from the year-ago quarter, driven by a near-record number of NovaSeq orders and HiSeq conversions.

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Looking ahead, Illumina expects full-year 2021 adjusted earnings per share (EPS) of $5.10 to $5.35 on revenues of between $3.79 billion and $3.89 billion. “Our business delivered strong sequential growth in the second half of 2020, and we expect continued recovery from the pandemic in 2021,” CEO Francis deSouza told investors during the conference call, per Business Wire.

As of Feb. 15, 2021, Illumina stock has a market capitalization of $73.7 billion and trades nearly 40% higher over the past month. Over the past year, the shares have gained 73%. From a valuation standpoint, the stock trades at 76 times forward earnings, 55% above its five-year average multiple of 49 times.

Wall Street View

Last week, Canaccord’s Max Masucci maintained the firm’s ‘Neutral’ rating on the stock while raising his price target to $410 from $350. The analyst believes the company’s acquisition of cancer screening startup Grail has the potential to dilute earnings in upcoming quarters but still provides investors with a long-term buying opportunity, especially if purchased during periods of share price weakness.

Elsewhere, the Street consensus remains split. The shares receive 5 ‘Buy’ ratings, 1 ‘Overweight’ rating, 8 ‘Hold’ ratings, 2 ‘Underweight’ ratings, and 3 ‘Sell’ recommendations. Through Friday’s close, the stock currently trades at an 18.6% premium to analysts’ 12-month median price target of $425.50.

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Technical Outlook and Trading Tactics

Illumina shares have trended steadily higher since late November, accelerating to a new all-time high (ATH) on above-average volume Friday after the company’s upbeat earnings. Furthermore, last month’s golden cross of the 50-day simple moving average (SMA) above the 200-day SMA indicates the start of a new uptrend.

However, given the relative strength index (RSI) sits in extreme overbought territory, investors should consider waiting to enter on retracements to a multi-month trendline that finds a confluence of support from the rising 50-day SMA.

For a look at today’s earnings schedule, check out our earnings calendar.

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