Stifel Reiterates Buy Rating on Illumina (ILMN)

Stifel analyst Daniel Arias reiterated a Buy rating and $160.00 price target on Illumina (NASDAQ: ILMN).

The analyst comments "One month after adding ILMN to the unreliable entities list as an act of retaliation against the US increasing tariffs on China, China today announced that a penalty for being on that list for ILMN is they are now prohibited from exporting gene sequencers to China. This does not appear to prohibit sales of consumables or services to the region, which represents the vast majority of ILMN's China revenues. ILMN management had stated over the last month that they are still conducting "business as usual" in China, so this does change the picture but is not exactly an unexpected outcome given the direction of trade conversations. From a mix standpoint, overall company instrument sales represented 12% (ex-Grail) of total revenues in 2024 but were likely a lower proportion of China revenues. Greater China revenues (including Taiwan and Hong Kong) were $308M last year, and ILMN saw a 19% decline in 2023 and a 20% decline in 2024 in the region. Greater China revenues represented 10% of overall company revenues as recently as 2022, but last year represented just 7% of overall revenues. ILMN noted in its 10k that material impairment charges could be incurred if ILMN were to cease or curtail operations in China, so an impairment charge will be something to watch for in 1Q earnings although it may not be needed for a ban on instrument sales alone. ILMN has 86,000 sq ft of lab and office space in China, with the leases set to expire in 2026-2028. In terms of impact, assuming instrument sales represent 11% of revenues in Greater China and go to zero for the full year (ignoring any sales before the ban and ignoring continued sales to Taiwan and Hong Kong), that would represent a $34M hit, for an ~80 bp headwind to overall company organic growth. In a worst-case scenario, if ILMN's total China business goes to zero, the impact would be ~$300M for a 7- point headwind to the top line, or about a $250M (6 points to organic) headwind compared to expectations for China going into the year. At first glance, we see a $0.30 adj. EPS headwind for FY25 if China goes to zero, although costs would almost surely be cut in that scenario to offset the impact."

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 $84.20 yesterday.

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