Illumina Inc.

In the 3-months ending April, ILMN has posted gains in 7 of the past 10 years, generating a 10.35% average return and a 8.19% median return. ILMN's standard deviation is 23.07% in the period and its correlation to the SPY is 0.24.
 

China spending on R&D is expected to eclipse the U.S. by 2022, providing opportunity for Illumina to expand the percentage of sales from APAC (ex-Japan) from its current 12% levels.  A move to more normalized U.S. Federal budgeting provides greater FDA clarity, supporting commercial R&D spend, and NIH funding (+$1 billion YoY), supporting academic research spend.  45% of researchers are pessimistic about the sufficiency of their research budgets, suggesting pent-up spending demand.  Personal genomics are the second highest area for technology development, suggesting ongoing support for ILMN products.  U.S. life sciences R&D spending is projected climbing 2.2% this year to $93 billion; while global spending grows 3.1% to $201 billion, (spend was $184 billion in 2011).  ILMN's sales rose 25% to $387 million in the fourth quarter, translating into earnings per share of $0.56, up from $0.53 last year.

An increase in R&D to 17% from 15.4% and additional investments in personnel pushed SG&A up to 22.2% of sales from 19.9% last year, weighed down earnings. Sales for the full year totaled $1.42 billion, up 24%, while non-GAAP income climbed to $1.80 from $1.59 in 2012.  55% of its sales come from the Americas, 25% from EMEA and 12% from APAC (ex-Japan).  Japan accounts for another 8%. Shipments to academic/Government users grew a compounded 14% from '08-'13.  Commercial grew 34%.  Hospital grew 24%.  Non-profit grew 13%. The company believes future growth opportunities exist in reproductive health and cancer treatment. Following the lows at the start of the decade when Roche & Merck shuttered RNA programs, interest/spending in RNAi is rebounding.  Financing is also climbing for epigenetics R&D programs thanks to collaborations/IPOs (Celgene has been active in partnering with emerging epigenetics plays). 

ILMN is also advancing demand for gene sequencing in regulated /clinical settings. Future demand drivers may include the use of ILMN products in sequencing tumor samples, national population sequencing, personal sequencing, at-birth sequencing, and as a tool for transforming cancer into a chronic disease. Illumina believes the $1 billion oncology research/translational market opportunity can be expanded by $11 billion by addressing clinical needs tied to DNA/RNA/protein programs.  As a result, the company is boosting its commercial sales team to target hereditary, therapy/diagnostic, and molecular monitoring (chronic myeloid leukemia). The company delivered free cash flow of $100 million in the quarter and Illumina is guiding for 15-17% top line growth and $2-$2.06 per share in earnings in 2014.  The company is guiding for up to $2.4 billion in 2016 (15-20% annually) sales and for EPS growth that outpaces revenue growth.  Illumina has beat analysts' expectations in 4 of the past 4 quarters, prompting analysts to boost their 2015 earnings forecast to $2.54 from $2.49 in the past 90 days.  25% of the float is held short, representing 19 days to cover. 
 

 
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Adobe Systems Incorporated

In the 3-months ending April, ADBE posted gains in 9 of the past 10 years, generating a 10% average return and a 6.84% median return. ADBE's standard deviation is 12.36% in the period and its correlation to the SPY is 0.19.
 

Sequential top line growth is expected to begin in in the 2nd half of this fiscal year resulting in flat FY14 versus FY13 sales; accelerating to growth in '15 and '16 (Adobe expects reported revenue for its Digital Media business will total $2.5 billion in FY14).  Those revenue projections translate into EPS expectations of $2 in FY15 and $3 in FY16.  The transformation to cloud based recurring revenue continues as subscription revenue grew from $673 million in FY12 to $1.1 billion in FY13.  More than 1.4 million subscribe to Adobe Creative Cloud (up 400k QoQ), producing 2.4 million projects last fiscal year.  ADBE closed 80 $1 million+ enterprise contracts for Creative Cloud last FY. Adobe Marketing Cloud sales exceeded $1 billion in FY13 (up 26% YoY), processing 17 trillion transactions across 500 billion web and mobile site visits.  Marketing Cloud sales rose 38% YoY to $316 million last fiscal quarter. ADBE closed 70 $1 million+ Marketing Cloud contracts in FY13.  Subscribers to Document Services grew 109% to 1.6 million.  Product sales fell from $3.3 billion to $2.47 billion. Companywide, sales were $1.04 billion in Q4 and $4.06 billion in FY13. 

Results were led by subscription revenue, which climbed from $194 million in FYQ4'12 to $360 million in FYQ4'13.  Overall, recurring subscription revenue now represents 44% of all sales, up from 27% a year ago.  Cash from operations totaled $1.15 billion during the FY.  In FY14, Adobe is guiding for $1.10 in non-GAAP EPS.  Exiting FYQ4, ADBE expects long term compounded annual revenue growth of 20% through 2016, thanks to 25% annual growth for Marketing Cloud and 20% growth for Digital Media. Building off the success 3D printing capabilities from companies like 3D Systems Corporation (DDD), Adobe is building out its own 3D print capability in Photoshop Creative Cloud with the aim of being the leader in 3-D model. This will include support for MakerBot, Shapeways, Sketchfab, and etcetera.  Adobe has over $3.1 billion in cash and ST investments and the company repurchased 7.9 million shares in FYQ4 and 21.6 million shares in FY13.

Company's FYQ4 EPS transcript