Market, Policy Trends Are Shifting In Illumina's Favor, Morgan Stanley Says In Upgrade
The bearish case for Illumina, Inc. (NASDAQ: ILMN) has come to an end for four key reasons, according to Morgan Stanley.
The Analyst
Analyst Steve Beuchaw upgraded Illumina from Underweight to Equal-weight with a price target lifted from $210 to $320.
The Thesis
Illumina stands to benefit from multiple market developments and policy changes, Beuchaw said in the upgrade note. (See the analyst's track record here.)
They are:
The success of DNA-driven drug administration, which prompted the FDA's support of DNA-based companion cancer diagnostics and expansion of Medicare reimbursements.
Government funding for DNA analysis could expand globally.
Consumer interest in DNA-derived applications.
A global mix shift toward genomic research.
Morgan Stanley's prior bear thesis on Illumina now appears "flawed," but a bullish stance on the stock can't yet be made for the following reasons, Beuchaw said:
The stock's more than 50-percent return since the start of 2018 implies it is trading at a 17-percent premium to its 10-year historical multiple.
Expectations for NovaSeq to see a growth deceleration in the third year of its cycle in 2019.
Any timeline for favorable reimbursement changes are difficult to model.
Competition could intensify.
Illumina's longer-term market opportunity is "undeniable," but its valuation is stretched at current levels, according to Morgan Stanley.
Price Action
Illumina shares were trading up 1.75 percent at $338.19 at the time of publication Tuesday.
Related Links:
Baird Weighs In On Illumina's Guidance, NovaSeq Platform
Illumina Reported Its Fastest Top-line Growth Since 2015
Photo courtesy of Illumina.
Latest Ratings for ILMN
Aug 2018 | Morgan Stanley | Upgrades | Underweight | Equal-Weight |
Jul 2018 | Bank of America | Maintains | Buy | Buy |
Jul 2018 | Barclays | Maintains | Overweight | Overweight |
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