DNA stock has target dropped by Raymond James

Saying he’s still got a lot of confidence in the company, Raymond James portfolio manager Rahul Sarugaser reiterated in a Friday report an “Outperform” rating on Ginkgo Bioworks (DNA Stock Quote, Charts, News, Analysts, Financials NYSE:DNA), saying a recent equity offering shouldn’t scare away investors, despite first impressions.

Ginkgo Bioworks, a cell programming biotech company that designs and builds custom living cells, saw its share price drop this week after announcing a sale of shares for gross proceeds of $100 million plus up to $15 million on a 30-day option. The company said the proceeds will go towards offsetting the cash used to finance its Bayer CropScience acquisition.

Sarugaser’s take is that while DNA stock has been pummeled with the rest of the tech and biotech market over the past year, part of the ongoing investor faith in the company was in its $1.4-billion cash balance which would allow the science to keep progressing without the need for equity raises — hence the confusion on the new issue of shares.

Sarugaser said, “[W]hile dilution has been nominal (~two per cent), management has now set a precedent: DNA is willing to finance (even small amounts) at current prices. This financing has, as we hear from investors, weakened the perception that DNA’s current balance sheet will protect them. So, with this recent turn in sentiment, we’ve seen the stock sell off (down [19.1 per cent] versus NYSE down [1.1 per cent]) and short interest ramp up.”

Sarugaser said it may take some time for Ginkgo management to remedy the perception issue. For the present, the analyst has adjusted estimates in his valuation, resulting in a reduction in his target price from $10.50 to $6.00, which at the time of publication represented a projected one-year return of 178 per cent.

“We have unflinching confidence in DNA’s long-term prospects given our overall thesis that biology is this century’s new manufacturing, and DNA is the spider at the centre of this massive, growing new web. This said, there remain skeptics in the market about DNA’s ability to deliver on the grand promise that is the future of bioengineering and bio-manufacturing, which has also contributed to the company’s stock price decline this past year,” he wrote.

Looking ahead, Sarugaser is now estimating 2022 revenue of $458 million and negative EBITDA of $182 million. 

Ginkgo Bioworks reported its third quarter 2022 financials on November 14, showing $66 million in revenue and an adjusted EBITDA loss of $70 million.

Ginkgo Bioworks News

In other news, on October 18, Ginkgo announced a partnership with Bayer to develop biological solutions in areas such as nitrogen optimization, carbon sequestration, and next generation crop protection. The previously announced transaction will see Joyn Bio, the joint venture created by Bayer and Ginkgo Bioworks in 2017,  integrated into Ginkgo Bioworks.

“Biological solutions play a critical role in the agricultural innovation ecosystem, and we see tremendous opportunity for these products to add even more value for agriculture in the future,” said Dr. Robert Reiter, Head of R&D at Bayer’s Crop Science Division. “The open innovation approach will accelerate the product pipeline and will make sure that we bring high-quality biological solutions and innovative technologies to the market faster.”

“Ginkgo is committed to harnessing the power of programmable biology to enable sustainable food production and food security worldwide,” Jason Kelly, CEO and co-founder of Ginkgo Bioworks said. “We look forward to partnering with Bayer and other innovative companies, and to bringing more applications on to Ginkgo’s expanded agricultural biologicals platform so that growers worldwide can develop breakthrough products.”

About Ginkgo Bioworks Holdings by ChatGPT

Ginkgo Bioworks is a biotechnology company based in Boston, Massachusetts that specializes in genetic engineering, cell programming and synthetic biology. The company was founded in 2008 by five scientists from the Massachusetts Institute of Technology (MIT) with the goal of using synthetic biology to design organisms that can perform useful tasks.

Ginkgo Bioworks provides a platform for organism engineering and has developed a high-throughput pipeline for the rapid prototyping, testing, and scaling of genetically modified microbes. The company’s technology has been used to develop new fragrances, flavors, and other consumer products, as well as to optimize industrial processes such as fermentation and chemical synthesis.

In addition to its platform technology, Ginkgo Bioworks has also formed partnerships with various companies and organizations, including large chemical and pharmaceutical companies, to develop novel biotechnology products and solutions. The company has raised significant funding f and has become one of the most well-known and well-funded biotechnology juniors in the world.