On Tuesday, BTIG maintained its Sell rating on shares of Ginkgo Bioworks Holdings Inc (NYSE:DNA), with a price target of $0.20. The firm's stance comes in the wake of Ginkgo's announcement of a significant workforce reduction, aiming for adjusted EBITDA breakeven by the end of 2026. Ginkgo, which has been spending approximately $100 million in cash per quarter, intends to cut costs to save over $85 million annually.
In the second quarter of 2024, Ginkgo Bioworks surpassed both BTIG's and Wall Street's revenue expectations. This performance was attributed to the company's acceleration of biosecurity revenue within the quarter. Despite the better-than-expected top-line results, Ginkgo has maintained its revenue guidance for 2024, which was previously lowered during the first-quarter earnings call.
Ginkgo is also launching a new initiative, lab data as a service (LDaaS), aimed at attracting more customers to its outsourcing services. However, BTIG expresses concern regarding the potential for LDaaS to generate lower economic returns compared to Ginkgo's traditional cell programs. The firm notes that management has not yet disclosed the expected revenue impact of these new LDaaS programs.
The Sell rating and price target are based on BTIG's valuation of Ginkgo's net cash position, which is currently estimated at $0.36 per share. Nonetheless, the firm anticipates that Ginkgo will continue to invest and consume cash resources in the coming years as it pursues its business objectives.
In other recent news, Ginkgo Bioworks Holdings Inc. has released its financial results, revealing a 20% year-over-year decrease in cell engineering revenue to $36 million. Despite this, the company maintains its full-year guidance with expected cell engineering revenue between $120 million to $140 million.
Biosecurity revenue was reported at $20 million, with a promising 41% gross margin. Ginkgo Bioworks is implementing significant cost reduction measures, anticipating over $85 million in annualized savings once fully executed. The company is also focusing on enhancing service quality for existing customers and growing revenue through solutions and tool sales.
As part of its strategic adjustments, Ginkgo Bioworks introduced a genomic analysis program for H5N1 and plans to expand its offerings in the agriculture and biopharma sectors. The company reaffirmed its commitment to achieving adjusted EBITDA breakeven by the end of 2026. These are among the recent developments impacting the company's financial outlook.
InvestingPro Insights
In light of BTIG's assessment of Ginkgo Bioworks Holdings Inc (NYSE:DNA), InvestingPro data offers additional context for investors. Ginkgo's market capitalization currently stands at $583.84 million, reflecting the scale of the company within its industry. Despite recent challenges, the company holds a gross profit margin of 80.22% for the last twelve months as of Q2 2024, highlighting its ability to retain a significant portion of revenue after the cost of goods sold is accounted for.
However, the company's financial health is under scrutiny, with a notable revenue decline of 43.45% over the same period. This aligns with BTIG's concerns, as Ginkgo's strategic initiatives, including workforce reductions and new service offerings like LDaaS, are efforts to pivot towards profitability. An InvestingPro Tip emphasizes that Ginkgo holds more cash than debt on its balance sheet, providing some financial flexibility in the short term. Another tip points out that the stock is trading near its 52-week low, which may attract investors looking for a potential turnaround or value play.
For those interested in a deeper dive, InvestingPro offers 14 additional tips on Ginkgo Bioworks, available through its platform. These insights could be crucial for investors considering whether to follow BTIG's sell rating or to take a different stance on the stock's future.
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