One of the standouts of today's morning trading session has been Illumina, which logged a -5.3% drop and underperformed the S&P 500 by -5.3%. The Diagnostics & Research stock is now trading at $196.28 per share and is -20.23% below its average target price of $246.07. Analysts have set target prices ranging from $150 to 350 dollars per share, and have given the stock an average rating of hold.
It seems the market sentiment regarding Illumina is mostly optimistic, since it has a short interest of only 2.9%. This is the percentage of the share float that is being shorted by investors who are hoping the stock's price will decrease in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Illumina, institutional investors own 92.6% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in ILMN, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
To sum up, Illumina is probably the subject of mixed market sentiment because of an analyst consensus of strong upside potential, a hold rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about ILMN:
The stock has trailing 12 month earnings per share (EPS) of $4.44
Illumina has a trailing 12 month Price to Earnings (P/E) ratio of 44.2 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 4.6 in contrast to the S&P 500's average ratio of 2.95
Illumina is a Healthcare company, and the sector average P/E and P/B ratios are 13.21 and 4.07 respectively