mstar: Illumina ILMN reported first-quarter results Tuesday that were in line with our expectations, so we're leaving our fair value estimate unchanged. Total revenue climbed to $122 million, or 69% higher than the same quarter a year ago. Illumina continues to drive growth by expanding its instrument base and constantly bringing new products to the market. Instrument sales totaled $45 million in the quarter, compared with just $20 million in the year-ago period, led mainly by strong placements of the firm's DNA sequencer platform, first launched a year ago. Illumina introduced a second generation of its sequencer platform during the first quarter, which uses new camera components to process images at faster rate. As a result, Illumina believes its platform can now seque nce 3 billion base pairs per run, versus 1 billion with the original technology--a significant improvement. Also, Illumina recently introduced its iScan system, which the firm believes will result in a sixfold increase in throughput for genotyping applications versus its original BeadStation platform. Illumina now boasts a large base of installed instruments across the genotyping, gene expression, and DNA sequencing markets, clearing a path for high-margin consumables sales to follow for years to come. However, we think the market is building unrealistic expectations into Illumina's share price. While we acknowledge that Illumina holds an enviable position, we think it will face significant challenges longer term, including strong competition in DNA sequencing. While the market continues to extrapolate Illumina's current results indefinitely, we think the firm will be unable to sustain its technology edge into the future, given the constant threat of new entrants and short i nnovation cycles. Those factors could constrain profitability and growth longer term.
Jeff Viksjo |
