Biotech company Ginkgo Bioworks Holdings, Inc. (DNA) develops the leading horizontal platform for cell programming. The company’s platform is used to program cells to enable the biological production of products, including novel therapeutics, food ingredients, and chemicals derived from petroleum. It serves several end markets, such as specialty chemicals, food, agriculture, consumer products, and pharmaceuticals.
DNA has declined 71.1% in price year-to-date and 74.9% over the past year to close the last trading session at $2.51. The stock is currently trading 84.2% below its 52-week high of $15.86, which it hit on November 9, 2022.
Renowned investor Cathie Wood has recently loaded up the stock in her portfolio, taking advantage of the dip. On September 2, Wood purchased more than 1.07 million shares of DNA. The stock has 8.71% ARK ownership.
Cathie Wood’s Ark funds, the flagship Ark Innovation Fund (ARKK), and the ARK Genomic Revolution ETF (ARKG) own more than 87 million shares of DNA in total, becoming the company’s third-largest shareholder. Over the past few months, Wood made multiple purchases of DNA.
The biotech company recently reported deteriorating financials. For the fiscal 2022 second quarter ended June 30, 2022, DNA’s revenue increased 231.4% year-over-year to $144.62 million. However, its loss from operations widened 979.2% from the year-ago value to $646.91 million.
Furthermore, DNA reported a loss before income taxes of $670.62 million, compared to a $54.90 million loss in the prior-year quarter. The company’s net loss and loss per share attributable to DNA common stockholders came in at $670.57 million and $0.41, worsening 1,131.2% and 925% year-over-year, respectively.
Here is what I think could influence DNA’s performance in the upcoming months:
Bleak Growth Prospects
Analysts expect the company’s revenues to decrease 25.7% year-over-year to $57.65 million in the fiscal 2022 third quarter (ending September 2022). The consensus loss per share for the ongoing quarter is expected to come at $0.22, worsening 175% from the same period in 2021.
Furthermore, the company's loss per share for the fiscal 2022 and 2023 is expected to come in at $1.10 and $0.20, respectively. Also, analysts expect the company to report revenue of $400.89 million for the next year, indicating a decline of 8.4% from the previous year.
Low Profitability
In terms of trailing-12-month CAPEX/ Sales, DNA’s 4.40% is 25.6% lower than the 5.91% industry average. And its trailing-12-month asset turnover ratio of 0.42% is 43.1% lower than the 0.73% industry average.
Likewise, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 167.62%, 190.40%, and 148.52% compare to the industry averages of 13.87%, 7.61%, and 5.50%, respectively.
Frothy Valuation
In terms of forward EV/Sales, DNA’s 7.28x is 434.8% higher than the 1.36x industry average. Its 10.24x forward Price/Sales is 898.9% higher than the 1.02x industry average. Likewise, the stock’s 3.08x forward Price/Book is 75.2% higher than the 1.76x industry average.
POWR Ratings Reflect Bleak Prospects
DNA's overall F rating translates to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
DNA has a grade of F for Stability. The stock’s relatively high beta of 2.71 justifies the Stability grade. In addition, it has an F grade for Quality, consistent with its lower-than-industry profitability multiples.
DNA is ranked last of the 399 stocks in the F-rated Biotech industry
Beyond what I have stated above, we have also given DNA grades for Sentiment, Growth, Value, and Momentum. Get all DNA ratings here.
Bottom Line
DNA delivered disappointing financial results in the second quarter of fiscal 2022. And analysts are bearish about the company’s revenue and earnings growth prospects. Furthermore, the stock is currently trading below its 50-day and 200-day moving averages of 2.95 and 4.80, respectively, indicating a downtrend.
So, given DNA’s deteriorating financials, weak growth prospects, low profitability, and higher-than-industry valuation, we think it may not be wise to follow Cathie Wood’s action.
How Does Ginkgo Bioworks Holdings, Inc. (DNA) Stack Up Against its Peers?
DNA has an overall POWR Rating of F. One could also check out these other stocks within the Biotech industry with an A (Strong Buy) rating: Vertex Pharmaceuticals Inc. (VRTX), Biogen Inc. (BIIB), and Incyte Corporation (INCY).
DNA shares rose $0.04 (+1.59%) in premarket trading Tuesday. Year-to-date, DNA has declined -69.80%, versus a -16.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Cathie Wood Doubled Down on This Biotech Stock, Should You? StockNews.com
