NEW YORK – Barclays on Monday downgraded shares of Illumina to an Underweight rating.
In a note to investors, analyst Luke Sergott said a number of factors have "[led] us to see greater risk to management's ability to deliver on their long-range plan." Uncertainty about Illumina's ability to operate in China, a market that accounts for 7 percent of revenues, was chief among them, following last week's announcement that the Chinese government had put the firm on a blacklist and could potentially target it for sanctions. In addition, "increasing competition from Roche in [the] clinical market" and fourth quarter sequencing consumables revenues that "came in well below expectations" were noted by Sergott as factors.
The move follows TD Cowen, which downgraded Illumina to a Hold rating on Friday, following the release of the firm's fourth quarter and full-year 2024 financial results and 2025 guidance. Illumina said it expects 2025 core revenues to grow in the low-single digits compared to 2024; however, this guidance did not consider any potential impact from the China announcement earlier that week.
Sergott wrote that seasonality and delayed purchasing likely couldn't explain the soft Q4 consumables revenues. "We didn't see similar genomics consumables demand falter for the rest of [Illumina's] peers," he wrote. "The more concerning dynamic is how high-throughput consumables declined quarter over quarter in the midst of a decent budget flush and at the tail end of the first year of the 25B flow-cell launch."
"We think that the [NovaSeq] X is cannibalizing samples from NovaSeq 6000 and NextSeq 2000 instruments," he wrote.
In Monday morning trading on the Nasdaq, shares of Illumina were down 7 percent at $103.65. Other sequencing-based tools firms were also trading down following a Friday evening announcement that the National Institutes of Health would cap grant payments for indirect costs at 15 percent.