Ginkgo Bioworks Holdings, Inc.

Ginkgo Bioworks Holdings Inc. (NYSE: DNA) is developing a platform that allows customers to manipulate cells with the same ease as programming computers. Their platform is versatile and can be applied to various markets, spanning from food and agriculture to industrial chemicals and pharmaceuticals, making it market-neutral and applicable across a wide range of biotechnology applications.

Recent Financial and Business Updates:

• Decline in Revenue and Operating Losses in Q2 2024: Ginkgo Bioworks reported a significant drop in total revenue for the second quarter of 2024, amounting to USD 56 million, a 30% decrease from USD 81 million in the same period last year. The revenue decline was primarily attributed to the anticipated reduction in K-12 testing within Ginkgo's Biosecurity segment. The Cell Engineering division also saw a 20% decrease in revenue, falling from USD 45 million to USD 36 million, primarily driven by a reduction in revenue from early-stage customers. However, this was partially offset by growth from large enterprise customers. The Biosecurity segment reported revenue of USD 20 million, with a gross profit margin of 41%. Despite these numbers, the company posted a significant loss from operations of USD (223) million, a larger loss than the USD (184) million recorded in the prior year. This includes stock-based compensation expenses and restructuring costs, such as asset impairments.
• Adjusted EBITDA and Cost Management: Ginkgo's Adjusted EBITDA for the second quarter of 2024 stood at USD (99) million, a deterioration from the USD (80) million loss in the prior year. This negative performance was largely driven by the drop in total revenue, which was only partially mitigated by a reduction in some operating expenses. Ginkgo ended the second quarter with a robust cash and cash equivalents balance of USD 730 million. Jason Kelly, Ginkgo’s co-founder and CEO, highlighted the company's focus on reducing costs, which includes a recent reduction in workforce by 35%, a move aimed at achieving Adjusted EBITDA breakeven by the end of 2026.
• Strategic Business Highlights: In the second quarter of 2024, Ginkgo continued to make notable strides in its Cell Engineering platform, adding 18 new programs and customer contracts. Ten of these programs were comparable to previously reported New Programs, while eight additional contracts represented a variety of smaller deal archetypes, including Laboratory Data as a Service (LDaaS) projects. Notably, the company signed its first LDaaS deals with a large-cap technology company in the protein characterization space. Moreover, Ginkgo reached a significant technical milestone with a major pharmaceutical customer and announced a new collaboration with Syngenta Crop Protection to optimize a microbial strain for Syngenta's biological solutions pipeline.
• Biosecurity and Genomic Monitoring Initiatives: Ginkgo’s Biosecurity division remains focused on delivering innovative solutions for persistent and pervasive monitoring. In response to the emerging threat of H5N1, the company proposed a Genomic Analysis Program designed to detect and analyze the virus as it spreads and evolves. This initiative builds on current food safety practices and introduces novel genomic analysis capabilities to enhance monitoring efforts. These developments reflect Ginkgo's broader commitment to advancing its biosecurity offerings in response to global health challenges.
• Financial Outlook for Full Year 2024: Ginkgo reaffirmed its guidance for total revenue in 2024, projecting revenue between USD 170 million and USD 190 million. The company expects Cell Engineering services revenue to range from USD 120 million to USD 140 million and anticipates at least USD 50 million in Biosecurity revenue for the year. Additionally, Ginkgo continues to focus on cost-cutting measures, including non-people-related cost reductions and site consolidations, aiming for over USD 85 million in annualized savings by mid-2025 as part of its broader plan to achieve breakeven Adjusted EBITDA by the end of 2026.

Technical Observation (on the daily chart)

The Relative Strength Index (RSI) over a 14-day period stands at 53.47, recovering from oversold zone, with expectations of further upward momentum in case the price breaks an important resistance level near USD 9.50-USD 10.50. Additionally, the stock's current positioning is below both 50-period SMA and 200-period SMA, which may serve as a dynamic short-term resistance levels.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a “WATCH” rating is recommended for Ginkgo Bioworks Holdings Inc. (NYSE: DNA) based on the closing price of USD 8.31 as September 19, 2024. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is September 19, 2024. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar