Wang & Lee Group board approves 250-to-1 reverse share split
On Tuesday, Goldman Sachs adjusted its outlook on Ginkgo Bioworks Holdings Inc (NYSE: NYSE:DNA), reducing the price target from $12.00 to $7.00. The firm kept its Sell rating on the stock. The revision follows an update to the financial model to account for the company's recent 1-for-40 reverse stock split.
The investment firm's revenue and earnings per share (EPS) forecasts for Ginkgo Bioworks remain unchanged for the years 2024, 2025, and 2026, with projected revenues of $187.0 million, $189.7 million, and $201.7 million, respectively. The EPS estimates are similarly held at ($12.95), ($7.04), and ($4.23) for the same periods.
The change in the price target is attributed to a shift in valuation methodology. Goldman Sachs has altered the weighting of its valuation approach to 45% Sum of the Parts (SOTP) and 55% Discounted Cash Flow (DCF) from an even 50%/50% previously. This adjustment is due to a deceleration in revenue and uncertainties surrounding the growth trajectory for cell engineering.
Despite the adjustments, the firm's valuation multiples for Ginkgo Bioworks' Cell Engineering/Biosecurity segments remain at 1x. The discount rate is held at 11%, with a terminal growth rate of 3%. These constants are factored into the new valuation framework.
The revised price target of $7.00 reflects the changes in the valuation methodology, addressing the slower revenue growth and the growth uncertainties in the cell engineering sector. Goldman Sachs' decision to maintain the Sell rating indicates a cautious stance on the company's stock performance.
In other recent news, Ginkgo Bioworks Holdings, Inc. has enacted significant amendments to its corporate charter, including a one-for-forty reverse stock split. The move, which aims to consolidate shares and potentially boost the stock's market price, was approved by company shareholders.
Ginkgo Bioworks has also introduced officer exculpation provisions in its amended charter, which aims to offer legal protection to its officers against certain types of lawsuits.
The company reported a decrease in cell engineering revenue to $36 million, a 20% drop from the previous year, while biosecurity revenue stood at $20 million. Despite the decline, the company reaffirmed its full-year guidance, expecting cell engineering revenue between $120 million to $140 million. In response to these financial results, Ginkgo Bioworks is implementing cost reduction strategies, anticipating over $85 million in annualized savings.
In the wake of these developments, BTIG maintained its Sell rating on shares of Ginkgo Bioworks. The firm expressed concern regarding the potential for Ginkgo's new initiative, lab data as a service (LDaaS), to generate lower economic returns compared to the company's traditional cell programs.
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