Biotech stocks attracted investors’ attention last year due to their role in developing vaccines and therapies to save the world from the COVID-19 pandemic. However, several industry participants have delivered disappointing stock market performance this year due to uncertain macroeconomic conditions.
Ginkgo Bioworks Holdings, Inc. (DNA) develops a platform for cell programming. Its platform is used to program cells to enable the biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum.
The company serves various end markets, including specialty chemicals, agriculture, food, consumer products, and pharmaceuticals. Ginkgo Bioworks partnered with Selecta Biosciences, Inc. to develop the ImmTOR technology platform.
In the last reported quarter, the company’s revenue came above analyst estimates, while its loss per share came in higher than the consensus estimate. The company reported a loss per share of $0.41, missing the consensus estimate of $0.14. Its revenue came in 86.3% higher than Street estimate.
DNA’s stock has declined 64% in price year-to-date and 67.3% over the past year to close the last trading session at $2.99. It is trading 81.1% below its 52-week high of $15.86, which it hit on November 9, 2021.
Here’s what could influence DNA’s performance in the upcoming months:
Weak Financials
DNA’s total operating expenses increased 664.2% year-over-year to $791.52 million for the second quarter ended June 30, 2022. The company’s loss from operations widened 979.2% year-over-year to $646.90 million. Its net loss widened significantly to $668.82 million. Also, its loss per share widened 925% year-over-year to $0.41.
Unfavorable Analyst Estimates
Analysts expect DNA’s EPS for fiscal 2022 and 2023 to remain negative. Its revenue for fiscal 2023 is expected to decline 8.4% year-over-year to $400.89 million. It failed to surpass Street EPS estimates in each of the trailing four quarters.
Stretched Valuation
In terms of forward EV/S, DNA’s 9.97x is 600.6% higher than the 1.42x industry average. Likewise, its 12.20x forward P/S is significantly higher than the 1.10x industry average. Its 3.67x forward P/B is 101.5% higher than the 1.82x industry average.
Weak Profitability
DNA’s trailing-12-month ROTC is negative compared to the 7.62% industry average. Its 4.40% Capex/Sales is 25.6% lower than the 5.91% industry average. Likewise, its trailing-12-month ROA is negative compared to the 5.50% industry average.
POWR Ratings Reflect Bleak Prospects
DNA has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. DNA has a D grade for Value, in sync with its stretched valuation.
It has an F grade for Quality, consistent with its weak profitability. Moreover, its unfavorable analyst estimates justify its F grade for Sentiment.
DNA is ranked last out of 398 stocks in the F-rated Biotech industry. Click here to access DNA’s ratings for Growth, Momentum, and Stability.
Bottom Line
Although the acquisitions of Zymergen and Bayer’s West Sacramento agricultural biologicals are expected to drive DNA’s growth, the company might take a significant time to report a profit. Given its weak financials, unfavorable analyst estimates, stretched valuation, and weak profitability, it could be wise to avoid the stock now.
How Does Ginkgo Bioworks Holdings, Inc. (DNA) Stack Up Against Its Peers?
DNA has an overall POWR Rating of F, equating to a Strong Sell rating. Therefore, one might want to consider investing in other Biotech stocks with an A (Strong Buy) or B (Buy) rating, such as Vertex Pharmaceuticals Incorporated (VRTX), Biogen Inc. (BIIB), and Amgen Inc. (AMGN).
DNA shares were trading at $3.07 per share on Wednesday morning, up $0.08 (+2.68%). Year-to-date, DNA has declined -63.06%, versus a -16.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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