Shares of Illumina (ILMN) are on the rise on Tuesday after the company reported preliminary revenue for the first quarter that came in ahead of expectations and said it sees revenue growth for fiscal year 2021 between 25% and 28%. While both Wells Fargo and Canaccord acknowledged that a "beat and raise" was widely expected, they were both surprised by the "magnitude."

PRELIMINARY RESULTS: Illumina said it sees first-quarter revenue of roughly $1.085B, with consensus at $924.6M. The company's record preliminary revenue in the first quarter of 2021 was driven by record orders of approximately $1.4B in the quarter and sequencing revenue growth of approximately 28% compared to the prior-year period; sequencing consumables growth of approximately 25% compared to the prior-year period demonstrating the solid recovery from the COVID-19 pandemic and the strength of our core business; and sequencing instrument growth of approximately 120% compared to the prior-year period, reflecting strong performance across all instrument categories. The mid-throughput category achieved another record quarter in placements. Some customers built additional capacity for COVID-19 surveillance work and accelerated instrument purchases, which resulted in approximately $35 million of incremental instrument revenue in the quarter.

Illumina also said it sees fiscal year 2021 revenue growth between 25%-28%. "Our core business is exceptionally strong and growing ahead of our expectations. This is reflected in our outstanding preliminary first-quarter revenue and, as a result, we are raising our 2021 revenue guidance," said Francis deSouza, President, and CEO. "We are seeing broad-based acceleration across our core clinical and research applications as more patients, physicians, and researchers than ever access the benefits of next-generation sequencing. In addition, we are experiencing increased demand for COVID surveillance globally due to the critical role that Illumina's next-generation sequencing technology plays in the fight against this pandemic."

SURPRISED BY MAGNITUDE OF BEAT: Following the announcement, Canaccord analyst Max Masucci raised the firm's price target on Illumina to $460 from $445, while keeping a Buy rating on the shares. The analyst said he was positively surprised by the magnitude of its first-quarter beat and raised guidance. He came away with increased conviction that the company's business stands to accelerate meaningfully in the back side of the pandemic. Masucci had upgraded Illumina to Buy from Hold last Wednesday given his belief in the precision medicine revolution, which is being driven by genomics, proteomics, and other technologies that enable researchers, doctors, and patients to understand the unique characteristics of their biology.

Wells Fargo analyst Dan Leonard also raised the firm's price target on Illumina to $330 from $300 to reflect higher earnings estimates. The analyst acknowledged that an Illumina beat and raise was widely expected, but not of this magnitude. Nonetheless, Leonard keeps an Underweight rating on the shares as he believes Illumina’s core research business is maturing while its diagnostic opportunities might not inflect at the rate the Street expects.

PRICE ACTION: In morning trading, shares of Illumina have gained over 9% to $419.26.