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William Blair Downgrades Illumina to Market Perform

NEW YORK (GenomeWeb) – Investment bank William Blair today downgraded Illumina's stock to Market Perform from Outperform, citing the company's position in its current new product adoption cycle after the launch of the NovaSeq sequencing system.

In a note to investors, analyst Amanda Murphy noted that llumina's stock has performed well recently and is approaching its all-time high of $241, which it hit on July 20, 2015 after the launch of the HiSeq X. The stock gained 71 percent in 2017.

Murphy also noted, however, that Illumina is a "product cycle company and thus has seen waves of new product adoption." As such, its stock performance and valuation are driven by acceleration and deceleration in growth of instrument adoption.

"Share price depreciation has typically preceded a decline in instrumentation revenue by a quarter or two," Murphy wrote. "While we may be looking at this too simply, instrumentation comparisons become much more difficult after the second quarter of 2018 — looking at prior launches, typically we have seen a bolus of adoption in the first four to six quarters."

William Blair's analysis suggests that Illumina's stock could hit $250, which is a 7 percent upside from the current price, as the product cycle for the NovaSeq continues to ramp up. Therefore, Murphy noted, investors may be better served by waiting for a deceleration in the cycle as an entry point to buying the stock.

Illumina's shares fell 2 percent to $227.99 in morning trading on the Nasdaq.

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