FTSE 100: Index falls as earnings results weigh; pound below $1.33, Bodycote soars
On Monday, Barclays (LON:BARC) reaffirmed its Overweight rating on Twist Bioscience (NASDAQ:TWST) with a steady price target of $45.00. According to InvestingPro data, the company currently has a market capitalization of $2.17 billion and demonstrates strong financial health with a current ratio of 4.96, indicating robust liquidity position. The positive stance comes as Twist Bioscience plans to spin off its DNA Storage division, a move that Barclays analyst believes will reduce the company’s cash burn by $25 million and enable it to reach EBITDA break-even by the end of fiscal year 2026, a year earlier than previously anticipated. InvestingPro analysis reveals that while the company isn’t currently profitable, it has maintained impressive revenue growth of 25.85% over the last twelve months.
The decision to separate the DNA Storage business is seen as a strategic move to enhance shareholder value, addressing long-term investor concerns about the project’s financial impact. Management’s commitment to avoiding capital raises in the open market has also been highlighted as a factor that could encourage investor engagement.
Despite not surpassing top-line expectations for the quarter, due to macroeconomic uncertainties affecting the A&G and Biopharma sectors, Twist Bioscience reported better than expected gross margins. The improved margins underscore the company’s ability to leverage volume within its platform. The analyst notes that gross margin guidance was raised by 50 basis points, suggesting a conservative outlook for the second half of the fiscal year 2025.
The analyst expressed confusion over the stock’s approximate 6% decline on the day, as the fundamental developments should have been positively received by the market. The removal of the DNA Storage business’s cash burn was a significant concern for investors, and with that issue addressed, along with clear progress towards profitability, the expectation was for the stock to perform better.
Barclays remains confident in Twist Bioscience’s business and advises investors to buy on the dips, maintaining the $45 price target. This target is based on a 6x enterprise value to revenue multiple on the firm’s projected 2025 revenue of $378 million. The stock currently trades at 4.73 times book value, and InvestingPro analysis suggests the stock is fairly valued based on its proprietary Fair Value model. Subscribers can access 6 additional ProTips and a comprehensive Pro Research Report, which provides deep-dive analysis of TWST’s financial health, growth prospects, and competitive position.
In other recent news, Twist Bioscience reported a 23% increase in its second-quarter revenue, reaching $92.8 million, surpassing analyst expectations. Despite an earnings per share (EPS) of -$0.66, which fell short of the forecasted -$0.61, the company’s revenue performance was strong, with significant growth in its Synthetic Biology and Next (LON:NXT) Generation Sequencing segments. The company projects full-year revenue between $372 million and $379 million, maintaining a positive growth outlook. Evercore ISI adjusted its price target for Twist Bioscience to $50, down from $52, while maintaining an Outperform rating, reflecting a review of the company’s financial performance. Meanwhile, TD Cowen reaffirmed a Buy rating and a price target of $58, citing the company’s strong positioning against industry challenges, such as tariffs and fluctuating NIH funding. A notable development is the spinout of Twist Bioscience’s DNA data storage division into a separate entity, Atlas Data Storage, with $155 million in seed financing secured. This move allows Twist Bioscience to focus on its core operations while retaining a minority equity stake in Atlas. The company aims for EBITDA breakeven by the end of fiscal 2026, with strategic initiatives and operational efficiencies expected to drive growth.
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