On Friday, William Blair issued a downgrade for Ginkgo Bioworks Holdings Inc (NYSE: NYSE:DNA) stock, changing its rating from Market Perform to Underperform. The firm highlighted concerns over the company's quarter performance and its shift in business strategy, which includes moving away from intellectual property (IP) ownership and value share.
The analyst pointed out that Ginkgo's recent quarter results showed a miss in Cell Engineering and a reduction in guidance, which continues a pattern of the company not meeting its own forecasts. This trend has raised doubts about Ginkgo's ability to execute its business plans effectively.
The analyst also noted that the company's decision to stop focusing on IP ownership could eliminate potential revenue from milestones and royalties that were once considered a significant part of Ginkgo's value.
Furthermore, the removal of Cell Engineering program adds as a key performance indicator (KPI) without introducing a new volume KPI presents challenges in assessing the company's market traction and customer growth.
While cost control measures were acknowledged positively, especially in the current economic climate, the analyst expressed a lack of confidence in Ginkgo's ability to achieve its stated targets.
The downgrade comes as Ginkgo's shares are trading at a premium compared to peers, with a multiple of 7.6 times the firm's 2024 Cell Engineering sales target. This is notably higher than the life science tools and contract research organizations (CROs) peers, which trade at 4.0 times and 3.5 times, respectively.
The new Underperform rating reflects the firm's cautious stance on the stock until Ginkgo provides clearer insights into its long-term strategy and demonstrates more consistent and measurable performance metrics.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.