What Happened?

Shares of genomics company Illumina (NASDAQ:ILMN) fell 8.6% in the morning session after the company reported fourth-quarter results and provided full-year revenue guidance, which fell below Wall Street's expectations. The guidance did not account for the potential impact of the China Ministry of Commerce's decision to add the company to its 'unreliable entity list.' 

On the other hand, Illumina exceeded analysts' organic revenue expectations this quarter, breaking its three-quarter streak of organic revenue declines. Its full-year EPS guidance also outperformed Wall Street's estimates. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. However, the weak guidance and lack of uncertainty on issues in China are likely to weigh heavily on the minds of investors.

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What The Market Is Telling Us

Illumina’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 3 days ago when the stock dropped 6.3% on the news that China put the company on its "unreliable entity" list, opening the door to possible sanctions. The move came after the Trump administration slapped a 10% tariff on Chinese goods. Financial filings in 2024 revealed that Illumina makes about 7% of its sales from China, and it's unclear whether China's action is a short-term reaction or one with longer consequences.

Illumina is down 14.2% since the beginning of the year, and at $112.32 per share, it is trading 27.6% below its 52-week high of $155.15 from November 2024. Investors who bought $1,000 worth of Illumina’s shares 5 years ago would now be looking at an investment worth $381.63.

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