NEW YORK (GenomeWeb) – Investment bank Canaccord Genuity today started coverage of Illumina with a Buy rating and a $275 price target on the firm's stock.
Noting the flush next-generation sequencing market and the large shadow cast by Illumina in the space, Canaccord analyst Mark Massaro called Illumina "a must-own stock for large-cap growth … given the company's dominant leadership position, innovation, and pipeline in the dynamic next-generation sequencing market opportunity we peg at close to $50 billion by the end of the decade."
Meanwhile, Illumina's array business, which Massaro estimated to generate about 15 percent of Illumina's total revenues, is a "stable and predictable product line that serves as an opportunity to upgrade customers to sequencing."
Massaro estimated Illumina's current total addressable market at $30 billion, compared to the company's estimate of $20 billion for 2014, and said that Illumina's NGS platforms could "revolutionize" the genetic research market as well as the clinical diagnostic space.
In a separate note, he said that in interviews with key opinion leaders and NGS users, the consensus is that Illumina is the market leader in the research NGS market, but that the clinical sequencing space remains an open field. However, Massaro said that Illumina's early market dominance has created a high barrier to entry for other firms.
In particular, he said that non-invasive prenatal testing is the largest near-term driver in the clinical sequencing space for Illumina. "Any major coverage decision regarding average risk patients could accelerate the adoption of Illumina's products," Massaro said.
He further noted that Illumina "can continue to put competitive concerns at bay thanks to the consistent fumbles of its competitors." BGI recently launched the Revolocity system and said it plans to launch the BGISEQ-500 platform in the fall, but neither announcement has dented Illumina's stock because of BGI's "failure to achieve a better instrument to knock Illumina off its perch," he said.
Massaro also said that he believes Life Technologies' Ion Torrent Proton PII chip, which is anticipated to launch before the end of the year after an extensive delay, "may underwhelm" and ultimately have little effect on Illumina in the exome sequencing space. There could also be further delays to the launch of the product, he added.
Qiagen, meanwhile, has also experienced delays in the launch of its NGS platform, which if they continue, could represent a source of upside to Illumina.
In afternoon trading on the Nasdaq, shares of Illumina rose 3 percent to $238.55.