Genetic sequencing equipment maker, Illumina (NASDAQ:ILMN), in its recent SEC filing revealed that the company has kicked off its employees’ layoff schedule this month and expects to announce more later. As part of its plans to reorganize cost structure, it is also closing office space.
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The Layoffs Jig
Biotech company Illumina announced the start of job cuts to manage high inflation headwinds and help the company realign its operating expenses. The company announced in its latest quarterly results that it targets reducing its annualized run rate expenses by more than $100 million, starting late 2023. This will enhance margins and make capital available to expand investments in high-growth areas.
In an SEC filing yesterday, Illumina announced that it had initiated a headcount reduction process on June 21 and expects further trimming down in Q3. It estimates charges of $25 to $35 million thanks to the current and planned workforce reductions. Most of these charges will be included in its Q2 results.
Based on internal emails obtained and reviewed, Health news website STAT first reported on Monday that Illumina has commenced the layoffs with 10% of its research and development team.
Departing from Office Space
Illumina also disclosed its exit from the i3 campus in San Diego, California, which has related assets worth $60 million on its balance sheet. Furthermore, it is evaluating its options related to the Foster City, California campus, which has $186 million worth of assets on the Illumina balance sheet. The company foresees incurring charges related to both assets, which it is unable to estimate currently.
Why is Illumina Stock so Low?
In the past three months, the ILMN stock price eroded 12% of its value amid uncertainty surrounding the removal of the CEO on activist Carl Icahn’s attempts. Also, Icahn pointed out that the Grail repurchase has led to the deterioration of core business.
Overall analyst sentiment remains positive after the departure of Illumina CEO, Francis DeSouza. Investors are now looking for a definitive position on Grail and foresee the return of former CEO Jay Flatley.
Of the 14 Wall Street Analysts covering ILMN stock, seven rate it a Buy while five assign a Hold, and two stand at a Sell rating. This takes the average analyst consensus to Moderate Buy, Further, analysts’ 12-month average price target of $245.06 implies a 27.7% upside potential from current levels.
Two weeks ago, Canaccord Genuity Analyst Kyle Mikson reaffirmed his Buy rating on the stock with a $300 price target marking a 56.4% upside potential from current levels. Piper Sandler Analyst David Westenberg also maintained his Buy rating with a $290 price target, implying a 51.1% upside potential from current levels.
