Morgan Stanley: Illumina's Q1 Guidance Puts 2019 Targets In Question

Illumina, Inc. ILMN announced 2019 revenue growth guidance of 13-14 percent, and much of this revenue growth is expected to be in the back half of the year.

Yet the company's first-quarter guidance raises concerns around whether Illumina can meet its full-year target, according to Morgan Stanley.

The Analyst

Analyst Steve Beuchaw maintains an Equal-Weight rating on Illumina with a $288 price target. 

The Thesis

Illumina reported a marked deceleration in revenue growth to 11 percent in Q4 versus the 20-percent growth generated in the previous four quarters, Beuchaw said in a Wednesday note.

The Q4 results were pre-announced and the 2019 guidance was as expected, the analyst said. 

Illumina’s Q1 guidance grabbed attention, as it reflects a deceleration in growth to single digits and is 6-percent below consensus expectations, Beuchaw said. Investor feedback “highlights a lack of confidence” in the company being able to achieve its 2019 guidance, he said. 

The 2019 guidance indicates large population sequencing projects that will impact near-term results, the analyst said. 

Morgan Stanley lowered its revenue estimates for 2019 and 2020 by 6.7 percent and 8 percent, respectively. The firm also lowered margin expansion expectations, resulting in a downward revision of EPS estimates for 2019 and 2020 from $6.83 to $6.38 and from $8.28 to $7.69, respectively.

Price Action

Illumina shares were down 4.86 percent at $271.39 at the time of publication Wednesday. 

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Earnings Scheduled For January 29, 2019