Illumina Stock Remains Undervalued Amid Regulatory Risks

Illumina's stock remains undervalued despite regulatory risks in China and the US. The company's high profitability and market position in the genetic sequencing industry make it a strong investment opportunity. As a finance expert with experience at Bloomberg, I recommend investors to consider Illumina's potential for growth and long-term value.

Illumina (NASDAQ: ILMN) has been under the spotlight due to regulatory risks in both China and the United States. Despite these challenges, the company's high profitability and market dominance in the genetic sequencing industry make it a compelling investment opportunity. This article delves into the recent financial performance and outlook of Illumina, highlighting why investors might consider the stock.

Illumina's second-quarter (Q2) 2025 financial results show a revenue of $1.06 billion, a 3% decrease from Q2 2024. The company reported a non-GAAP operating margin of 23.8% and a diluted EPS of $1.19. These figures reflect a slight decline in revenue but maintain strong profitability [2]. The decrease in revenue can be attributed to various factors, including higher freight and duties costs due to tariffs and an increase in field service costs, partially offset by lower strategic partnership revenue.

One of the notable developments is Illumina's acquisition of SomaLogic from Standard BioTools, which is expected to close in the first half of 2026, subject to regulatory approval. This acquisition aims to strengthen Illumina's position in the proteomics market and expand its product portfolio [2].

Moreover, Illumina's financial outlook for fiscal year 2025 expects a total company constant currency revenue decline in the range of (2.5%) to (0.5%), up from (3%) to (1%) previously. The company expects a non-GAAP operating margin of approximately 22% to 22.5%, and non-GAAP diluted EPS in the range of $4.45 to $4.55, an increase from its May guidance of $4.20 to $4.30. This includes a benefit of approximately 10 cents from recently passed legislation that allows U.S. based R&D spend to be tax-deductible [2].

Despite the regulatory risks, Illumina's strong market position and high profitability make it a potential long-term investment. The company's focus on operational excellence and innovation, as seen in the launch of new products like TruSight Oncology 500 version 2 and PromoterAI, underscores its commitment to growth and technological advancement.

In conclusion, while regulatory risks in China and the US pose challenges, Illumina's robust financial performance and market leadership in genetic sequencing provide a strong foundation for long-term value. Investors should consider Illumina's potential for growth and the company's strategic initiatives to mitigate regulatory risks.

References:
[1] https://seekingalpha.com/article/4808245-illumina-the-stock-is-still-undervalued
[2] https://emea.illumina.com/company/news-center/press-releases/press-release-details.html?newsid=bbc5765a-ff9d-4bd1-af1e-85339cc61062