DNA - Stay Away: Why Ginkgo Bioworks Stock Is Not for the Faint-Hearted
2024-07-10 06:35:00 ET
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There’s definitely a science to picking beaten-down gems in the stock market. If you get it wrong, you could lose a lot of money. Ginkgo Bioworks (NYSE: DNA ) is certainly an interesting company and Ginkgo Bioworks stock is beaten down, but the risk-to-reward profile just isn’t favorable right now.
Ginkgo Bioworks, which specializes in cell programming and biosecurity , has a promising arrangement with a giant in the global biotechnology market. This cannot be overlooked, and we’ll discuss the details in a moment. Overall, however, Ginkgo Bioworks has bigger problems than opportunities and investors need to be on high alert in 2024.
Ginkgo Bioworks’ Big Team-Up
To be fair and balanced, I’ll start off with some positive news. It’s not brand-new news anymore, but it could have a lasting impact on Ginkgo Bioworks.
The company is teaming up with Dutch biotechnology behemoth Novo Nordisk (NYSE: NVO ) on multiple research and development projects. These projects will include diabetes and obesity medications, as well as several unspecified “early pipeline projects.”
Ginkgo Bioworks expects its collaboration with Novo Nordisk to “run over five years.” Since Novo Nordisk is an enormous company with deep pockets, this arrangement is a big win for Ginkgo Bioworks.
Ginkgo Bioworks announced this team-up three months ago. Hopefully, the company will provide frequent, meaningful updates on its arrangement with Novo Nordisk. Otherwise, investors will surely be frustrated and disappointed (or at least, they ought to be).
Ginkgo Bioworks: Bad News and Worse News
So, there’s some potentially positive news about Ginkgo Bioworks. Now, unfortunately, I must report the not-so-good news, which I believe outweighs the good news.
For one thing, Ginkgo Bioworks’ first-quarter 2024 financial report included a bombshell, and I don’t mean that in the positive sense of the word. Specifically, the company’s quarterly revenue plummeted 53% year over year to $38 million.
Ginkgo Bioworks cited “the expected ramp down of K-12 testing in Ginkgo’s Biosecurity segment” as an excuse for this dismal top-line result. This, however, only suggests that Ginkgo Bioworks’ “K-12 testing” experiment was an abysmal failure. Should investors call the management’s judgment into question, then?
Here’s more unfortunate news. Ginkgo Bioworks incurred a net earnings loss of $165.911 in 2024’s first quarter. On top of that, and perhaps worst of all, Ginkgo Bioworks might get delisted from the New York Stock Exchange .
The NYSE warned/threatened Ginkgo Bioworks because the company’s share price stayed below $1 for 30 consecutive trading days. As I’m writing this, Ginkgo Bioworks isn’t even close to $1.
Consequently, if the company continues to run afoul of the NYSE’s listing rules, don’t be too surprised if the exchange delists Ginkgo Bioworks. Getting kicked off the prestigious NYSE and relegated to the over-the-counter gulag would be a harsh blow for Ginkgo Bioworks and its loyal shareholders.
Ginkgo Bioworks Stock: Don’t Try This at Home
To reiterate, stock picking is a science and not every beaten-down stock is actually a bargain. Ginkgo Bioworks isn’t currently delisted from the NYSE, but cautious investors should see the writing on the wall.
As the old saying goes, “Don’t try this at home, kids.” Buying Ginkgo Bioworks stock is akin to experimenting with your capital, and that’s a risky proposition.
Sure, the Novo Nordisk collaboration could pay off big-time in the long run. This remains to be seen, however, and Ginkgo Bioworks needs to provide frequent updates on this team-up. Thus, for now at least, it’s not a great idea to invest in Ginkgo Bioworks.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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