Market Overview

PropThink: ILMN To Trade Up On Positive Business Trends, Potential 3Q EPS Upside


By David Moskowitz

Notwithstanding the take-out chatter on Illumina (NASDAQ: ILMN), with the potential that Roche (OTC: RHHBY) may take another run at the company for $60 a share (read more in PropThink's previous article), analysts are out with recent commentary that ILMN's business is performing well, which could drive the stock higher. Two broker dealers, Piper Jaffray and Leerink Swan, have each surveyed labs that use sequencing equipment and published on the results Tuesday and today, respectively, with the broad themes indicating that ILMN's HiSeq product line may have stabilized (previously in decline) and new customer upgrades could enable revenues to beat estimates over the next several quarters. Additionally, the MiSeq sequencing line continues to gain traction, and is the preferred system when users seek to order desktop-based sequencers. Both analysts note that 3Q is looking solid, hinting that Consensus revenue and earnings estimates are conservative (3Q Rev. and EPS estimates are $284.4M and $0.39, respectively). Expect ILMN shares to get a lift from optimism on the business, as well as the chance for earnings upside, with the added benefit that a Roche take out bid could surface. Analysts have mixed opinions on whether the Roche interest is real, but given that ILMN continues to posture as a willing seller, and Roche has clearly demonstrated its interest in ILMN in the past, we are believers.

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