Reviewing large-cap stocks of biotech ETFs
The large-cap stocks of the iShares US Medical Devices ETF (IHI) outperformed the other large-cap stocks of biotech ETFs with a return of 0.6% for the week ending May 6, 2016. It outperformed the SPDR S&P 500 ETF (SPY). SPY fell by 0.3% for the same period. However, on the other side, the large-cap stocks of the iShares Nasdaq Biotechnology ETF fell by 2.6%. The large-cap stocks of the SPDR S&P Biotechnology ETF (XBI) fell by 1.8%. Finally, the large-cap stocks of the Health Care Select Sector SPDR ETF (XLV) fell by 0.8% for the week ending May 6, 2016.
The above graph shows the performance of large-cap stocks of different biotech ETFs as of May 6, 2016.
Illumina (ILMN) was the top performer among large-cap stocks with a gain of 4.2% for the week ending May 6, 2016. Illumina announced its 1Q16 earnings on May 3, 2016. Illumina fell ~23% when it announced its estimated 1Q16 revenue on April 19, 2016. According to the press release, below are the earnings details in brief:
- Illumina recorded revenue of $572 million—compared to $539 million in 1Q15. This represents growth of 6%.
- On a generally accepted accounting principles basis, Illumina’s net income for 1Q16 was $106 million—compared to $135 million in 1Q15.
- The research and development expenses for 1Q16 were $124 million—compared to $91.8 million in 1Q15.
- The selling, general, and administrative expenses for 1Q16 were 149.2 million—compared to $116.3 million in 1Q15.
- For 2Q16, Illumina is projecting revenue of $590 million–$595 million.
Illumina closed at $140.71 and was trading well below its 20-day moving average. As of May 6, 2016, on a year-to-date basis, the stock is down by 26.7%. It’s similar to some of its peers such as Vertex Pharmaceuticals (VRTX), Regeneron Pharmaceuticals (REGN), and Alexion Pharmaceuticals (ALXN). They’re down by 32%, 31.9%, and 26.1%, respectively. Illumina is trading at a 2016 forward price-to-earnings multiple of ~34.8x. It has a book value of $14.08 per share. The stock is trading at a price-to-book value of ~10.0x. Illumina has a weight of 3.7% in IBB’s portfolio.