Illumina Inc. (ILMN-Q)

ILMN has been 'distracted' with its fight with activist investors, and its CEO has resigned as fall-out. But we think this is largely reflected in the price now. Illumina will need to regain trust in its ability to deliver on its longer-term goals after initial 2023 guidance for operating margin and EPS fell far short of consensus, which has since been taken down even further. Expectations may have been too frothy after Illumina announced new products and a solid longer-term financial framework at its Genomics Forum and investor day. The reduced outlook accounts for issues in China and the ramping up of its NovaSeq X launch, on top of depressed spending. Consolidated operating margin is forecast at 5% with Grail's dilution, vs. 20% for the core businesses. Top line sales rose just 1% in 2022 after generating an outsized 40% gain in 2021, and is expected to remain flat in 2023. Other components modest pressure from currency. All-in, not so great. But considering its strong market share, global exposure and solid history, we think it deserves a few more quarters. This year has been most unusual. EPS is expected to nearly triple over the next two years, and this (if it occurs) should get things going again. 
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80% of the world's genomic sequencing equipment runs on their machines. Strong cash flows, but earnings are a mess because they are spending on a big acquisition. But they have increased the board, which is good, and the company is well-positioned. The CEO resigned a few weeks ago and there's infighting about that acquisition.

Global leader in DNA sequencing. Almost 90% recurring revenue with good growth. Highly cash generative with good balance sheet. Good acquirer. Expects DNA sequencing will be a pervasive treatment option in healthcare. (Analysts’ price target is $404.80)

(A Top Pick Sep 12/19, Up 6%) The sector is interesting, though he sold Illumina, because the holding got too big. They supply testing machines for mines, which creates recurring revenues. Stick with it.

He is a big believer in disrupter companies in growth sectors. This is the only company in the world that can do high volume DNA sequencing. They already have a million customers and another million order backlog. There is no one else in this space. They sell equipment and the supplies to operate the equipment. Countries will have more DNA sequencing done to help new drug development. Yield 0%. (Analysts’ price target is $286.06)

Dominant player in gene sequencing business. Becoming more commercially available to clinics instead of just research labs. They are buying up some of their customers and going into competition with them. He is nervous of the valuation. It is at and beyond his expectations.