What the DNA filings/news actually say (recap) - 2025 revenue guide: $167–187M; Q2 revenue $49.6M (YoY –12%), with Cell Engineering +8% to $39.1M; Biosecurity halved.
- Cost reset executed: company says it reached $250M annualized savings (workforce + site consolidation). Operating loss narrowed; Q2 operating cash burn still heavy but improved. Cash/short-term investments ~$200M plus ~$270M marketable securities mid-2025.
- Mix shift: pushing toward platformized services (automation/ADME profiling, cell-free protein synthesis) vs bespoke programs. Guidance reiterates adjusted-EBITDA breakeven by end-2026 as an objective.
- Reverse split: 1-for-40 (Aug-2024). Shares ˜51–55 M post-split (varies slightly by period). Stock recently traded ~$11–12.
Business model—what works and what’s still unproven What works / can scale
- Cell Engineering is the healthier core (growing ~8% YoY in Q2). If Ginkgo sells more standardized, recurring assay/automation “products” (ADME, cell-free), gross margin should lift versus bespoke foundry jobs.
- The cost base has been reset. That gives a plausible runway into 2H-2026, if growth stabilizes.
What’s still unproven
- Topline growth consistency—overall revenue fell YoY and deferred revenue declined; Biosecurity is down. The new “productized” lines must offset this quickly.
- Cash-flow timing—management targets adj.-EBITDA breakeven by YE-2026, but Q2 operating cash burn was still large (albeit improving). Hitting CF breakeven likely requires both ~$220–260M revenue in 2026 and sustained mix shift to higher-margin offerings.
Bottom line on the model: this is still a turnaround-to-platform story. The case to underwrite is: (1) cost base stays contained, (2) Cell Engineering & productized services grow double-digits, (3) cash burn falls each quarter.
Peer context (why multiples should be conservative at first) - TWST (Twist Bioscience), a tools supplier with ~$360–380M TTM revenue, trades roughly EV/Revenue ~4–6× depending on the day.
- RXRX (Recursion), high-burn AI-drug-discovery, often carries >15–25× P/S in hype cycles—but that premium is for “platform optionality” with deep-pocket partners and is very volatile.
- ABCL (AbCellera) screens at high EV/Rev given cyclic revenue, but the point stands: early-profitability tools names generally re-rate after EBITDA turns visible.
Given DNA’s YoY revenue decline and CF gap, a conservative EV/Revenue of ~2× near-term makes sense; 4–6× becomes defendable after revenue growth + margin/CF visibility improve.
Price targets (post-split, with transparent math) Key base inputs
- Shares (FD planning): ~55M
- Net cash (cash + marketable securities – debt): assume ~$300–350M mid-’26 (after burn/liabilities; we’ll show sensitivity).
- Discount rate: reflected via multiple choice rather than an explicit DCF here.
12–18 months (late-2026 trajectory in sight) Bear (stall / more dilution):
- 2025–26 revenue flat to up slightly: $175–190M; Biosecurity stays weak, product lines slow.
- Multiple: EV/Sales ~1.5–2.0× (execution risk).
- EV $260–380M; + net cash ~$300M ? Equity $560–680M ? $10–$12/sh.
Base (costs hold; productization gains traction):
- 2026 revenue ~$210–230M; mix toward Cell Engineering & new offerings; quarterly cash burn trending to near-zero by YE-’26.
- Multiple: EV/Sales ~2.5–3.5× (early belief).
- EV $525–805M; + net cash ~$300M ? Equity $825–1,105M ? $15–$20/sh. (12–18 mo PT: $15–$20)
Bull (CF-breakeven visible by YE-’26):
- 2026 revenue ~$230–260M; GM lifts into mid-40s–50%; opex flat; clear positive OCF runway.
- Multiple: EV/Sales ~4–6× (platform starts to earn a tools multiple).
- EV $920–1,560M; + net cash ~$300M ? Equity $1.22–1.86B ? $22–$34/sh. (Upside case: $22–$34)
12–18 month target range (most likely): $15–$20.
To unlock $22–$34, you need both the revenue step-up and the CF-breakeven evidence.
Can they really be cash-flow positive by YE-2026? Skeptical but possible—and the targets reflect that. The management has been unwaveringly saying this for at least a year without moving the goal posts. To believe it, we need to see all three:
- Quarterly burn keep sliding (opex doesn’t re-inflate post-cuts).
- Cell Engineering + new product lines show sequential growth (not just one-offs), pushing GM toward mid-40s–50%.
- No large new liabilities (cloud / supply commitments) and no significant dilution before YE-’26.
If (1)-(3) show up in the next 2–3 quarters, the $15–$20 base PT becomes the default. Miss them, and you’re back in the $8–$12 zone with a probable capital raise.
Monitoring list (to move the target up or down) - Revenue mix & sequential growth in Cell Engineering and productized services (ADME/cell-free).
- Gross margin trajectory (low-40s ? mid-40s+).
- Operating cash flow each quarter (glide path to ˜0 by YE-’26).
- Deferred revenue / pipeline stabilization or growth.
- New marquee contracts (multi-year, recurring).
- Any financing—terms and timing.
PS I also own the 3 competitors mentioned. |
