Illumina: Preliminary Results Better Than Expected

Illumina announced preliminary results for the fourth quarter of 2023 that looked stronger than anticipated. In early trading, Illumina shares rose in the mid-single digits on a percentage basis, but shares continue to trade well below our $228 fair value estimate. Our moat rating on Illumina remains narrow, relating primarily to the intangible assets and switching costs in its legacy sequencing business. As a reminder, Illumina plans to divest liquid biopsy maker Grail through a third-party or capital market transaction by late 2024, with terms to be settled by midyear.