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Illumina (ILMN) Has Multiple Upgrade Opportunities, Maintain Overweight - Piper Jaffray

February 3, 2016 9:03 AM EST
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Price: $137.32 -0.98%

Rating Summary:
    16 Buy, 19 Hold, 5 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Illumina (NASDAQ: ILMN) announced 4Q15 results with revenue increasing 15.5% to $592M, ~in line with preliminary results (~$590M) and EPS of $0.81 (Street: $0.82), with sequencing consumables and desktop systems driving the results. Piper Jaffray analyst William Quirk trimmed the PT to $215 to account for lower estimates following the results.

Management reiterated F2016 revenue guidance of 16% (17% in constant currency (CC)) yoy growth to ~$2,573M and EPS of $3.55-$3.65, but signaled a lighter 1Q16.

Given the myriad of governmental programs in the works (Aust/UK PopSeq, U.S./China Personalized Medicine), we remain Overweight shares of ILMN with a $215 PT ($219 prior), which is based on 44x (unchanged) 2017E Ongoing EPS of $4.64 (was $4.69) and net cash/share of $9.31 (was $10.70).

Revenue increased 15.5% yoy (17% CC) to $592M, ~in-line with preliminary results. Instrument revenue decreased 5% to $148M (PJC: $162.9M), consumables grew 19% to $346M (PJC: $337.8M) and services rose 50% to $93.6M (PJC: $85.1M). Sequencing increased 19% yoy to ~$501M, with consumables offsetting lower instruments. Array revenue decreased 2% yoy to ~$86M. Adjusted gross margin decreased 60 bpts yoy to 71.7%. Ongoing EPS of $0.81 was $0.01 below consensus of $0.82.

NextSeq and MiSeq were the instrument highlights in the quarter, with management guiding HiSeq X in the range. Management noted the near-term deal funnel for X is lower than in recent quarters and expects 1Q16 below the 20-30 system range.

It appears the desktop funnel, while strong, is not as robust as 4Q15, leading the analyst to believe instruments will be lower until the MiniSeq starts to ramp.

The analyst believes "there are several upside opportunities" and left the Overweight rating unchanged. The PT went to $215 from $219 on a consistent multiple of earnings.

For an analyst ratings summary and ratings history on Illumina click here. For more ratings news on Illumina click here.

Shares of Illumina closed at $154.66 yesterday.



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