On Wednesday, Ginkgo Bioworks Holdings Inc (NYSE: NYSE:DNA) was downgraded from Neutral to Sell by a BTIG analyst. The decision followed Ginkgo's announcement of a difficult third consecutive quarter, which included a miss on Q1 expectations, a downward revision of its 2024 revenue guidance, and a significant reduction in both headcount and physical footprint by over 25% and up to 60%, respectively.
The analyst expressed concerns over Ginkgo's key "cell program add" metric, which previously correlated with revenue growth, now presenting uncertainty in its predictability for future revenue. The company is also shifting its commercial strategy, focusing less on downstream economics and more on onboarding customers to its new lab data service. This strategic pivot has led to challenges in forecasting the company's business model.
The concerns about Ginkgo stem from the lack of clarity on how the new cell program adds will translate into revenue growth in the years 2024, 2025, and beyond. The analyst cited difficulties in modeling the business due to this uncertainty and the strategic alterations being made.
Ginkgo's new approach comes amid a challenging funding environment for early-stage biopharma companies. The analyst's report suggests that these changes in strategy raise questions about the company's future revenue streams and overall business direction.
As a result of these factors, the analyst has set a price target for Ginkgo Bioworks at $0.50 per share. The downgrade and new price target reflect the firm's concerns about the visibility and viability of Ginkgo's revised business strategy and its potential impact on the company's financial performance.
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