Goldman Sachs Comments On Illumina & Reiterates Its Buy Rating

Illumina ILMN pre-announced 4Q10 revenue of approximately $260 mn, ahead of the Street at $249 mn and in line with Goldman $259 mn estimate. However, EPS of $0.28-$0.29 fell short of Goldman/Street estimates of $0.33/$0.33. Guidance for 2011 was for approximately 20% growth, a 70% gross margin, and 30%-plus EPS growth based on 145 mn shares. In addition, ILMN unveiled a new sequencing instrument, MiSeq, updated specs on HiSeq, lower-cost arrays, an update on PCR, and a growing backlog in its sequencing services. These product updates raise the bar even higher for ILMN's competitors and should allow ILMN to maintain its leadership position. Multiple catalysts lay ahead as Goldman anticipates further product details at AGBT in February, an update on ILMN's bioinformatics strategy and plans for PCR content sometime this year. Goldman Sachs remains buyers based on the following. MiSeq expands the market for next-gen sequencing through workflow enhancements, lower entry price and technology familiarity. 2012 Street estimates are too low according to Goldman. Last night's announcements will drive estimates higher and note before today Goldman was already 5% above consensus 2012 EPS. ILMN is trading lower at $65.63