Please ensure Javascript is enabled for purposes of website accessibility

The Big Questions for Illumina After Its Q1 Sneak Peek and 2021 Guidance

By Keith Speights and Brian Orelli, PhD - Apr 14, 2021 at 7:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The gene sequencing giant has a couple of key challenges going forward.

Illumina (ILMN 1.23%) delivered a pleasant surprise earlier this month with its revenue growth projected for the first quarter and for full-year 2021. In this Motley Fool Live video recorded on April 7, Motley Fool contributors Keith Speights and Brian Orelli talk about what the big questions for the gene sequencing giant are now after its Q1 sneak peek and full-year guidance.

Keith Speights: Illumina, ticker there is I-L-M-N, just announced preliminary first-quarter revenue. Just earlier this week, the company said that they expect Q1 revenue of $1.085 billion. That's up 26% year over year from $859 million in the same quarter of last year. Illumina also projects full-year 2021 year-over-year revenue growth is going to be between 25% and 28%.

Brian, what do you think investors should make of Illumina's sneak peek at its Q1 revenue and its full-year guidance?

Brian Orelli: The first-quarter numbers looked really good. I was a little surprised at the guidance for the 2021. We're looking at 26% in the first quarter, and then 25-28% for the whole year. So first quarter pegged in between those two.

But the second quarter last year, was way down as labs shut down. I went back and last year second quarter was 633 million, so if they do the same amount between the first quarter of this year and the second quarter of this year, the quarter we're in right now, that would be growth of 71%.

I don't know, maybe management is sandbagging. The other possibility, I guess is that they obviously have more insight into the demand. Maybe there was a lot of pent-up demand and that's going to wane as the quarters go on. Academics often are using grant money. Sometimes that grant money is tied to specific fiscal years, and so money that wasn't spent in the second quarter because the labs were shut down and now they're back at it, maybe they're just going to use up all that money. But the end result is that Illumina doesn't get any extra growth from that.

Speights: The stock jumped on the news after Illumina announced this, the following day the stock jumped I think close to 10%, maybe not quite 10%. Investors were looking at it favorably. Obviously, you're looking at 26% revenue growth in Q1, around that same amount for full year. That's not bad. I guess the real question is how sustainable is it?

Orelli: My biggest issue is that last year was way down. If you're looking for 25-28%, I just feel like they should be able to do a lot more than that for the whole year given the second quarter was down so much last year.

Speights: Then the big wildcard, something you and I have already talked about just a few days ago. The big wildcard for Illumina now is what happens with their planned acquisition of GRAIL, with the FTC weighing in and potentially throwing a wrench into the plans there.

Orelli: I think the biggest issue for Illumina is that maybe they aren't able to buy any of their customers, so that limits their expansion opportunities. If the FTC is basically saying, you can't buy any of your customers because their competitors are also your customers, and so therefore, you can't buy any of your customers, that's going to limit their ability to move quickly into the diagnostic space.

Speights: They've already run into problems with their attempt to acquire PacBio, Pacific Biosciences of California (PACB -0.96%).

Orelli: That one I understand. Because they are competitors against each other. That one makes sense because they would have a larger percentage of the market share of sequencing, but not being able to buy your customer because the thing you acquired is competing against your customers and you're worried about them raising the rates on the customers so that they would be able to compete out of the market, I think is a real problem for Illumina.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Illumina, Inc. Stock Quote
Illumina, Inc.
$195.39 (1.23%) $2.37
Pacific Biosciences of California, Inc. Stock Quote
Pacific Biosciences of California, Inc.
$5.15 (-0.96%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.