For Immediate Release
Chicago, IL – May 28, 2019 – Zacks Equity Research Illumina ILMN as the Bull of the Day, Wix.com WIX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft MSFT, Facebook FB and Oracle ORCL.
Here is a synopsis of all four stocks:
Bull of the Day:
Illuminais the $45 billion leading developer of life science tools and integrated systems for large-scale analysis of genetic function and variation. Their technology is responsible for generating more than 90% of the world’s sequencing data.
You may have experienced Illumina technology if you ever ordered a DNA testing kit from a company like 23andMe or Ancestry.
ILMN is back in the upper tiers of the Zacks Rank after another beat and raise quarter that prompted Wall Street analysts to raise their estimates. More on the company's growth numbers coming up after we step back to see the scope of their efforts.
The Century of Biology Requires Powertools for Discovery
Ever since the human genome was mapped nearly 20 years ago, an explosion of scientific discovery has been unleashed with many hundreds of public and private companies, universities, and research institutes working to better understand life and cure disease.
According to the National Institute of Health (NIH), the cost to sequence a genome has fallen from $10 million in 2007 to under $1,000 today. And this economic access has fueled the rise of more scientists seeking to do more research that wasn't even thought of a decade ago.
When I think of role of this unique tool-maker in "the century of biology," I search for powerful metaphors to describe its reach and impact. If genetics is a great ocean, then Illumina is Queen Isabella of Spain, launching fleets of explorers to discover new worlds.
Once given the exploration, mapping, and conquest tools to do so, explorers would only need more of them to harvest and mine the riches of new lands. And that as we shall see, is exactly what has happened with Illumina's powertools -- the more reach and impact they give genetic explorers, the more exploration that is initiated and, thus, the more demand for its products occurs.
Honestly, I should have bought Illumina for Healthcare Innovators in 2017 when it was trading $200. But I didn't understand the company's impact, much less their valuation trading over 10X 2017 sales of $2.75 billion and 50X EPS of $4.00. Plus, Wall Street's (lazy) analysts underestimated the growth story too, with the average Street price target around $225 at the time.
Then the stock went on a tear in 2018 after a Q1 41% EPS beat in April, launching shares from $240 to $360+ in five months!
Every slight pullback was a tempting opportunity, even at 13-14X sales and 55-60X EPS. And we got a big second chance right before Q2 earnings when the stock got whacked from all-time highs above $315 back down to $290.
Time to Board the Starship Illumina
Then this past September, I really started paying attention to the Illumina story and doing my homework. At over $360 per share, ILMN was trading for over 15X next 12-month's sales (about $3.5 billion) and over 60X EPS (about $6). I told my followers "I don't think you need to rush out and pay that right now."
But I also advised "Long-term healthcare investors should be buyers between $320 and $340. And obviously, you would add on any bigger dips to $280-300 if a market correction of any magnitude should bless you with such an opportunity."
We obviously got those opportunities to start a position near $320 and add under $300 during the recent volatility and I would still recommend those buy levels. Especially as the stock now trades under 11X next year's projected sales of $4.3 billion.
The main reason we did is because the growth rates have slowed considerably. Last year saw 20% sales growth and a 40% EPS advance. But this year is projected to see only 13% topline growth and 17% on the bottom.
And yet long-term growth investors are still accumulating ILMN shares near $300 because the visibility for the next two years is so strong.
Who Is Illumina and What Do They Do?
As a California startup in 1998, Illumina was born toward the tail end of the scientific revolution we call the Human Genome Project, an international collaboration of dozens of universities and research centers around the globe. That was the same year that Craig Venter of Celera Genomics started his quest to complete the massive sequencing task faster and cheaper.
Their initial products enabled researchers to explore DNA at an entirely new scale, helping them create the first map of gene variations associated with health, disease, and drug response. With each technological breakthrough, they helped scientists better understand genetic variation at all levels of complexity.
Ever since, Illumina has developed one of the world’s most comprehensive genomics portfolio of integrated systems, consumables, and analysis tools. The company provides a line of products and services that serve the sequencing, genotyping and gene expression and proteomics markets.
Proteomics is the large-scale study of proteins, the basic building blocks of life. According to industry research firm MarketsandMarkets.com, "The global proteomics market is projected to reach $21.87 billion by 2021, at a CAGR of 11.7% from 2016 to 2021... significant growth is propelled by the increasing need for personalized medicine, R&D expenditure, technological advancements, and increased funding for proteomics projects."
Here's how Illumina describes their mission in all of their markets..
"While the rate of progress is accelerating exponentially, we are only beginning to understand the clinical significance of the genome. What causes a cancer cell to mutate? What is the origin of a puzzling disease? Is it possible to prevent the next outbreak? Or safeguard the world’s food supply? These are just a few of the challenges that inspire us to push the boundaries of our imagination.
"We strive to make our solutions increasingly simple, more accessible, and always reliable. As a result, discoveries that were unimaginable even a few years ago are now becoming routine – and are making their way into patient treatment.
"We now have the ability to sequence at an unprecedented scale. Collectively, this will give us a much deeper understanding of genetics than ever before. We will begin to truly unlock the power of the genome. These advances will trigger a fundamental shift in healthcare and beyond. Medicine will continue to become more preventive and more precise. We will be healthier, longer. We have only just begun.
"Our customers include a broad range of academic, government, pharmaceutical, biotechnology, and other leading institutions around the globe."
With less than half of one percent of the world's population touched by a genetic test of some kind, Illumina is filling a huge need with their fast and precise technologies.
The NASA of Biotechnology
From the above perspective on Illumina's customers, maybe ocean exploration is too limited a metaphor. The better comparison might be space. And that would make Illumina the NASA of genetics, providing aerospace-grade discovery tools.
Let's look at a list of their different NASA-grade exploration powertools...
NovaSeq Sequencing Systems
HiSeq X Sequencing Systems
HiSeq Sequencing Systems
NextSeq Sequencing Systems
MiSeq Sequencing System
MiSeqDx Sequencing System
MiSeq FGx Forensic Genomics System
MiniSeq Sequencing System
iScan Array Scanner
The NovaSeq product (pronounced Nova-seek) is the company's latest advanced sequencing tool, which costs over $980,000.
Here's how the excellent biopharma writer over Forbes, Matthew Herper, described the path of Illumina's business in 2017...
Illumina, the largest maker of DNA sequencers, is launching a new DNA sequencer with new architecture it says could push the cost of decoding a human genome from $1,000 to $100 -- although that decrease will not come for years.
“This is good news, affirming that the field is still so healthy that price-plummeting is still considered good for business,” says George Church, the Robert Winthrop Professor of Genetics at Harvard Medical School.
The new DNA sequencers, called the NovaSeq 5000 and the NovaSeq 6000, could be about 70% faster than existing machines, by Church’s math -- [which is not really a big increase in this exponential field as you can tell by the cost-drop of sequencing in the last decade].
But Illumina promises rapid increases as new parts and software upgrade the machines, meaning that by the end of the year the machines will be six times faster than its predecessors.
Bear of the Day:
Wix.com(WIX) is a $6.7 billion provider of website hosting and development tools. In its Q1 earnings report on May 16, the company delivered non-GAAP EPS of 3 cents, missing the Zacks Consensus Estimate of 9 cents.
Despite revenues surging 27% year over year, the big EPS miss and subsequent guidance caused the majority of Wall Street analysts to lower future estimates and pushed the stock to the cellar of the Zacks Rank.
Quarter in Detail
Collections during the reported quarter came in at $200.4 million, up 26% year over year, attributable to expansion of new products and enhancement of existing products. Management had projected collections in the range of $196 million to $197 million.
The company witnessed better-than-expected conversion and retention in its user cohorts. The company added a total of 180,000 net premium subscriptions in the reported quarter, which came in at 4.2 million as of Mar 31, 2019 (up 21% year over year).
Wix added 6.6 million registered users during the reported quarter. Registered users as of Mar 31, 2019 came in at 148 million, up 19% year over year.
During the reported quarter, average revenue per subscription (ARPS) increased 9% year over year. The surge can primarily be attributed to favorable mix of higher priced subscription packages.
Non-GAAP gross profit advanced 23.7% from the year-ago quarter to $136 million. Nonetheless, non-GAAP gross margin contracted 200 bps to 78%.
Total operating expenses surged 27.7% to $162.4 million in the first quarter.
The company reported non-GAAP operating loss of $2.2 million wider than year-ago loss reported at $0.8 million.
For the second quarter, the company expects revenues in the range of $182-$184 million, representing year-over-year growth of 25-26%. The Zacks Consensus Estimate for revenues is currently pegged at $184.06 million. Collections are projected to be in the range of $197-$199 million, suggesting growth in the range of 23-24% in the year-ago quarter.
The company updated fiscal 2019 guidance. Management now anticipates revenues in the range of $758-$763 million, up from prior guided range of $755-$761million. This indicates an improvement of 26% from the year-ago reported figure. The Zacks Consensus Estimate for revenues is currently pegged at $759.8 million.
Collections are projected to be in the range of $822-$830 million, suggesting growth of 25-26% from the prior-year quarter, compared with previous predicted range of $817-$827 million.
However, the company expects free cash in the range of $122-$126 million, indicating an improvement of 20-24% from the year-ago quarter, down from prior guided range of $135-$140 million.
Since the company report on May 16, the Zacks analyst consensus for 2019 full-year EPS dropped 26.5% from $1.13 to $0.83, representing -22.4% growth. But revenue growth remains robust at 26.2% to a projected $762 million.
I was an investor in Wix.com shares in 2017 as I admired their platform tools, growth, and broad popularity.
But I recently had a negative experience with Wix over their annual recurring billing policy and wondered if others have also. I was recovering from an accident and illness and missed the automatic annual subscription renewal of my website. I decided to cancel the $200+ in annual services for that site hosting but since I missed the 15-day window for annual cancellations, my refund/pro-rating request was denied with only reference to the policy.
I also lost my domain renewal in the process and so the services were further unusable and useless to me. I made 4 separate requests and all responses were the same. It wasn't about the money for me, but about the principle of having someone acknowledge my situation with some flexibility -- especially since they got all the money upfront for 12 months of services I wasn't using, and would not being using.
So to see what experiences others might have had, I entered "wix customer service reviews" in a Google search engine on May 27 and found the top 3 results were from trustpilot.com, whoishostingthis.com, and sitejabber.com.
Trustpilot had 990 reviews of which 44% were a "Bad" rating, with the same overall rating. The second most recent comment related to my experience...
They renewed our subs without our consent and when we try to ask for a refund they denied us right away without even investigating it first like they supposed to. and also their CS is the worst, never have we ever encounter such lazy, nonexistent CS , all is auto-generated computer responses.
Sitejabber.com had 292 reviews from their community with 165 (56.5%) offering only 1 star of 5.
WhoIsHostingThis.com has a much more extensive review by web hosting expert Dale Cudmore, published April 26 and titled "Wix.com Hosting: Powerful & Popular But Small Businesses Can Do Better. Here's Why."
In addition to Cudmore's evaluation of the features, tools, quality and value of Wix.com, the piece also offered 47 reviews by Wix customers with an overall 2.5 stars out of 5 for Support.
Here's part of the intro to Cudmore's article...
Wix is one of the most popular website builders on the market. But how many people really use the website builder?
Here’s an overview:
More than 3.3 million sites have been built using Wix. (Source: BuiltWith)
17,556 live sites in the US were built using Wix. (Source: BuiltWith)
287 of the top 100K sites in the US were built with Wix. (Source: BuiltWith)
As of 2017, Wix had 110 million users. (Source: Wix)
Each day nearly 45,000 people sign up to use Wix. (Source: Wix)
The numbers don’t lie. But, what do real users have to say about Wix?
(end of Cudmore article intro)
That last line sums it up. Numbers-wise, Wix is a strong growth business providing services to millions of users. And the recurring subscription model obviously works to boost revenues and profits.
But a valid question about customer service might concern whether strict, automatic enforcement of refund policies leads to short-term financial gains that will be harder to repeat if fewer satisfied customers return with new projects and business ideas that require webhosting.
In the company's favor is a big push into the professional market where web designers and marketing agencies take care of the website needs of multiple clients and businesses. And the company will spend $5 million per quarter the rest of this year on plans for expanded customer solutions/support staff. Management expects a 3X return on that investment, or $45 million into 2020.
These will be exciting developments to watch. As far as buying WIX shares, I'd wait until the earnings estimates stop going down and start going back up. The Zacks Rank will let you know.
3 Blue Chip Tech Stocks to Buy Right Now
Renewed U.S.-China trade war fears have hurt markets recently, with both the S&P 500 and the Dow down since the end of April. With that said, the S&P is still up roughly 12% in 2019, with large-cap tech giants like Apple and Amazon helping drive the comeback.
Despite the recent uncertainty brought about by the trade dispute between the world’s two largest economies, technology companies seem set to be long-term winners. Tech has been at the helm of our historic bull market, and in our increasingly interconnected digital world, it is likely that the industry remains a long-term growth driver.
Clearly, some of the volatility has made some investors more skeptical, with bearish traders quick to draw similarities between this latest tech rally and the infamous dot-com bubble of the late 90s and early 2000s. Yet, unlike the dot-com bubble, sustainable revenue and earnings expansion have fueled the current tech boom.
There are, of course, concerns about a global economic slowdown. This might mean that investors interested in tech search for companies that have proven their strength for years and look poised for solid expansion. With that said, let’s check out three blue-chip tech stocks to consider buying right now.
Microsoft has seen its stock price jump roughly 25% this year to outpace industry’s 18% average. MSFT shares opened Friday at $126.91, down just around 3% from their 52-week intraday trading high. The Windows and Office power is coming off better-than-projected Q3 fiscal 2019 financial results. Microsoft's legacy businesses have performed well and remain vital to individuals and businesses around the world. Yet, the Redmond, Washington-based firm’s growing cloud computing business is what has helped MSFT stock surge over the last few years. Microsoft’s Intelligent Cloud revenue climbed 22% last quarter, with its vital Azure division up 73%.
The firm’s expansion into cloud computing has seen it compete directly with industry leader Amazon and partner with behemoths such as Walmart for cloud, artificial intelligence, and more. More recently, MSFT joined forces with video gaming rival Sony for a cloud-gaming partnership. Our current Zacks Consensus Estimates call for the company’s adjusted full-year earnings to surge 18% on the back of 13% revenue growth. Looking further ahead, Microsoft’s fiscal 2020 EPS figure is projected to jump over 11% above our current year estimate, with revenue expected to climb 10.6% higher. Microsoft also currently pays an annualized dividend of $1.84 a share, which marks a 9.5% jump from the prior-year payout.
Microsoft’s positive earnings estimate revision activity, particularly for fiscal 2019 and 2020, helps it earn a Zacks Rank #2 (Buy) right now.
Facebook has been under the microscope for well over a year now for its handling of user data and outsized impact over the flow of information. In spite of all the worries that users would run away from the social media powerhouse, shares of FB have soared nearly 40% in 2019 and its user growth has remained solid. The firm posted stronger-than-expected Q1 revenue results, with revenue up 26%. Plus, Mark Zuckerberg’s company grew both its daily and monthly active user totals by 8%. Company executives estimate that over 2.7 monthly billion people use at least one of its “family” of services—which includes Facebook, Instagram, WhatsApp, and Messenger—every month on average. This figure alone should help Facebook remain an advertising juggernaut, alongside Google, for years to come.
On top of that, FB has invested in an e-commerce future, which includes its new Checkout on Instagram feature. Zuckerberg also recently detailed plans about how Facebook could start to focus on private encrypted messaging, payments, and other services. FB’s full-year 2019 revenues are expected to surge 24% to reach $69.22 billion, with adjusted fiscal year earnings projected to dip 7% as it spends to improve security and much more. With that said, the company’s adjusted 2020 earnings are projected to soar over 31% above our current-year estimate on 21% higher revenues.
Facebook is Zacks Rank #2 (Buy) at the moment and is trading at 21.2X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 26.5X average and its own three-year high of 37.3X and 27.6X median. This means that investors can say with some confidence that FB stock is relatively ‘cheap.’
Oracle is a Zacks Rank #2 (Buy) right now that boasts a “B” grade for Value in our Style Scores system. Oracle stock has climbed above the broader Computer Software-Services Market industry over the last 12 months, up over 12% against the industry’s 1.9% average climb. ORCL’s positivity helps it rest near new 52-week and all-time highs. Plus, the firm is coming off a better-than-expected Q3 fiscal 2019. ORCL is also a dividend payer that recently paid out a $0.24 per share dividend, up roughly 25% from its previous $0.19 payout. ORCL’s annualized dividend rests at $0.96 per share, with a yield of 1.81% at the moment.
Furthermore, Oracle is currently trading at 15.7X forward 12-month Zacks Consensus EPS estimates. Like Facebook, this falls well below its industry’s 26.5X average and its own five-year high of 19.3X. Investors might also be pleased to note that the historic tech giant has tried to expand its cloud business in recent years. Looking ahead, Oracle's adjusted current-quarter earnings are projected to pop 8.1% to hit $1.07 per share. The tech giant’s fiscal 2019 EPS figure is expected to jump by 10.3%. And ORCL’s full-year 2020 earnings are projected to climb 10.1% above our current-year estimate.
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