- Ginkgo Bioworks Holdings (DNA): Q1 2022 earnings showed a widening net loss.
- Having declined 70% in 2022 makes the stock a falling knife to catch.
- Generating losses is in the firm’s DNA.
Ginkgo Bioworks Holdings (NYSE:DNA) reported its Q1 2022 financial results on May 16 and the results were mixed, depending on your point of view. For me, the bottom line, a widening net loss makes me bearish on DNA stock.
This biotechnology company develops a platform for cell programming. I do not like a lot of biotech stocks for a single reason: Most of them have very poor fundamentals and their stock prices are mostly overvalued.
DNA stock is not immune to this. Do not confuse a company with promising products — or in the case of Ginkgo Bioworks, cell programs — with a good investment. This biotech stock is too risky to own and investing in it is a bet that you could win only by being very patient.
So what about hope for a rally in the shorter term? Probably not. Here are the reasons why.
|DNA||Ginkgo Bioworks Holdings, Inc.||$2.45|
Revenue Growth Is the Only Positive Thing
Ginkgo Bioworks Holdings reported mixed Q1 2022 financial results. The EPS GAAP of -$0.37 was a miss by -$0.20. On the other hand, the revenue of $168.41 million was a beat by $62.74 million.
Focusing on sales growth when analyzing these latest earnings is a great idea as Ginkgo Bioworks Holdings has been exceptional in generating revenue. In 2021, revenue growth surged 309.40% to $313.84 million.
In Q1 2022, total revenue of $168 million, showed an increase of 282% over Q1 2021 when revenue reported was $44 million. Two more positive factors announced were that “11 new Cell Programs added in Q1 2022, representing 175% growth over Q1 2021” and the company increased its full-year guidance for total revenue from $325-$340 million to $375-$390 million while “reiterating Foundry revenue guidance and increasing Biosecurity revenue guidance.”
My main concern is this statement: “$1.5 billion cash balance provides meaningful multi-year runway as we drive towards profitability.” I am not worried about the $1.5 billion cash, but about the path to profitability. In Q1 2022, Ginkgo Bioworks reported a loss from operations of $674.52 million and a net loss of $592.59 million. Both of these losses are wider than the ones a year ago. In Q1 2021, net loss from operations was $57.11 million and net loss of $74.78 million. EPS in Q1 2022, basic and diluted was -$0.37 compared to -$0.06 in Q1 2021.
The path to profitability seems to be going in the wrong direction now.
Don’t Try to Catch a Falling Knife
Unless you love catching falling knives, think twice with DNA stock. It has losses of 70% in 2022, approximately 75% in the past one year, 50% in the past 3-month period and nearly 36% in the past one month. No matter when you bought, you’ve likely incurred a loss.
The argument that biotech stocks are very volatile and can shoot up in one day based on news related to U.S. Food and Drug Administration approval of drugs or medicines is true, but pinning hopes on that possibility while incurring losses of up to 75% isn’t worth it. There’s simply better things to do with your money.
The Bottom Line on DNA Stock
Ginkgo has been losing money for two years now. In 2020 the net loss was $126.61 million and ballooned to $1.83 billion in 2021.
The Q1 2022 financial results showed a widening net loss too. The path to profitability seems now too far away. Avoid DNA stock for now.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Stavros Georgiadis, CFA 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.