Illumina doesn’t seem to be blocked from offering services in China, says Stifel

Stifel notes that China has announced that Illumina (ILMN) is now prohibited from exporting gene sequencers to China one month after adding the company to an “unreliable entities” list as an act of retaliation against the U.S. for increasing tariffs on China. However, this order does not appear to prohibit sales of consumables or services to the region, which represent “the vast majority” of Illumina’s China revenues, the analyst tells investors. Ignoring any sales before the ban and ignoring continued sales to Taiwan and Hong Kong and assuming instrument sales represent 11% of revenues in Greater China and go to zero for the full year would represent a $34M hit, for about an 80 basis point headwind to overall company organic growth, the analyst says. In “a worst-case scenario,” if Illumina’s total China business goes to zero, the impact would be about $300M for a seven point headwind to the top line, adds the analyst, who keeps a Buy rating on the shares.