ILMN Stock Set for Worst Day in Years on Revenue Bust

Recent Illumina option buyers are likely cheering

Deputy Editor
Jul 12, 2019 at 10:28 AM
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Biopharma concern Illumina, Inc. (NASDAQ:ILMN) is eyeing its worst day in nearly three years, after the company reported preliminary second-quarter revenue that fell well below analysts' expectations. The firm also lowered its full-year revenue growth forecast, citing a weak direct-to-consumer market, among other things. ILMN stock is down 16% at $305.59, erasing nearly all of its June gains. 

This dramatic plummet has attracted the attention of analysts, with Cowen, Leerink, and Cannaccord Genuity all issuing price-target cuts. Cowen, specifically, slashed its price target to $320. Evercore ISI, on the other hand, lifted its target price to $342 from $338. A round of downgrades could add pressure on the charts, too, with nine "strong buy" ratings on the board and only two "holds." 

Prior to today, this bullish sentiment wasn't surprising. ILMN just hit an all-time high of $380.76 earlier this week, before turning lower. In fact, this could mark the stock's third consecutive loss, and its first close below the 200-day moving average since early June. 

Despite ILMN's 20% rally last month, options bears have rarely been more active. ILMN's 10-day put/call volume ratio of 2.31 on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than all other readings from the past year.

Digging deeper, it looks as if the weekly 7/12 370-strike put saw the most initiations in the last 10 days, with open interest increasing by nearly 1,600 contracts. Buyers of the puts are likely cheering; should ILMN's losses hold until the options contract expires at today's close, the puts will be 65 points in the money.


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