Illumina shares gain after TD Cowen upgrade

Illumina (NASDAQ:ILMN ) shares climbed more than 2% Wednesday following an upgrade from TD Cowen, which raised its rating on the stock to Buy from Hold.

The upgrade comes on the heels of Illumina’s recent Strategy Update, where management outlined ambitious plans for revenue and earnings growth over the next few years.

TD Cowen analysts highlighted the company's potential for significant earnings per share (EPS) and revenue growth acceleration.

They noted that Illumina is poised for EBIT margin expansion of 500 basis points from 2025 to 2027, with sales growth expected to accelerate from a decline of 2% in 2024 to high single digits by 2027.

They believe this could yield a compound annual growth rate (CAGR) in EPS of 10-19% through 2027, offering the potential for approximately 20% upside in the stock price.

A key factor in the upgrade is the recent spin-off of GRAIL, which TD Cowen analysts see as simplifying Illumina’s business model.

"The GRAIL distraction is behind the company," they stated, noting that the deal’s dilution and strategic issues had previously kept investors wary.
TD Cowen also pointed to new management’s focus on operational efficiency, with a cost-cutting program targeting $200 million in savings by 2025.

Additionally, new product innovations and a maturing product cycle are expected to bolster revenue growth, despite ongoing competitive pressures.

With these factors in play, TD Cowen sees Illumina’s EPS CAGR as the best among large-cap peers, making now an "opportune time to revisit the long thesis" for the stock. They set a price target of $144, reflecting 20% upside potential.

Source: Investing.com