Illumina: EU Orders Grail Divestiture and Shares Remain Undervalued

The European Commission has ordered narrow-moat Illumina to divest the Grail liquid biopsy assets. Illumina has yet to respond to the most recent order, but in general, we suspect the firm's new management team will be more open to divesting Grail than the previous team. Our view of Illumina's narrow moat rating likely will not change if it divests Grail because the firm's legacy genomic sequencing business forms the foundation of its moat. Also, our $269 fair value estimate may not change until the spinoff is complete and may depend on how a potential divestiture is structured.