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Wells Fargo Upgrades Illumina to Outperform

NEW YORK (GenomeWeb) – Wells Fargo Securities has upgraded Illumina's stock to Outperform from Market Perform. The investment bank said that it anticipates 2018 will be a good year for clinical sequencing and also said that uncertainties around demand for sequencing capacity will ultimately resolve in Illumina's favor.

Tim Evans, a senior analyst with Wells Fargo, wrote in a note to investors that the investment bank does not expect an "earth-shattering" new product announcement but potentially "modestly positive announcements related to desktop sequencing or key collaborations" at next week's JP Morgan Healthcare Conference in San Francisco.

In addition, Evans wrote that the "key factor" in upgrading Illumina's stock was "early evidence that controversies over demand elasticity and capacity utilization, which plagued the final innings of the HiSeq X cycle, may resolve in Illumina's favor for the NovaSeq cycle."

Evans added that Wells Fargo estimates that Illumina has placed more than 280 NovaSeq instruments and that about one-third of customers are new to sequencing, statistics that "bode well for the elasticity question."

When Illumina reports its 2018 revenue guidance, Evans said that Wells Fargo will be looking for the firm to accelerate revenue growth just above the 13 percent growth it expected in 2017 and that it its earnings per share guidance should be "solidly above the Street." Analysts, on average, currently expect EPS of $4.47 for FY 2018.

Wells Fargo raised its full-year 2017 EPS estimate to $3.77 from $3.75 and its 2018 EPS estimate to $4.85 from $4.63.

In Tuesday morning trade on the Nasdaq, shares of Illumina were up around 2 percent at $223.37.