Illumina To Bear The Brunt Of Slowdown In Consumables Purchasing Amid Lower Demand In China: Analyst

Stifel analyst Daniel Arias reiterated a Buy rating on Illumina, Inc ILMN, lowering the price target to $225 from $265.

ILMN recently reported better-than-expected Q2 results, where revenue of $1.18 billion was up 1% Y/Y.

2Q results beat the Street, as NovaSeq X placements remain strong, but '23 consumables expectations have been reduced as customers experience instrument transition issues and elongated sales cycles, while China softens further, the analyst flags.

Regarding installing new NovaSeq X instruments, the company is encountering some installation issues that have made field experiences less than optimal.

The quarterly results for consumable demands were hampered by a choppy market on the research side - driven primarily by lower demand in China and an in-between-instruments transition issue for those moving from a Nova 6000 to a NovaSeq X, notes Arias. 

A more pessimistic view, however, might focus on the potential for a slowdown in consumables purchasing due to the significant reduction in the cost per genome ($600 at 30x on the Nova 6000 to $200 on the X), the analyst mentions.

Based on the above, the analyst lowered the Q3 revenue estimate to $1.13 billion from $1.16 billion. On the bottom line, Q3 adj EPS estimate is now $0.14 (was $0.01).

The analyst lowered the FY23 Y/Y revenue growth estimate to 0% vs +8%. Arias now expects FY23 revenue of $4.6 billion vs. prior estimate of $4.9 billion. 

Price Action: ILMN shares are trading higher by 0.37% to $185.17 on the last check Thursday.