Twist Bioscience’s SWOT analysis: stock outlook amid operational gains

Twist Bioscience Corporation (NASDAQ:TWST), a player in the U.S. Life Science Tools & Diagnostics sector, has been making strides in operational efficiency and product development. This comprehensive analysis examines the company’s financial performance, market position, and future prospects based on recent analyst reports and industry trends.

Company Overview

Twist Bioscience specializes in synthetic DNA and DNA-based products for various applications in life sciences. With a market capitalization of approximately $3.1 billion as of February 2025, the company has been attracting attention for its innovative approaches to DNA synthesis and storage.

Financial Performance

Twist Bioscience’s financial performance has shown mixed results. InvestingPro analysis indicates the company currently trades above its Fair Value, despite maintaining a strong gross profit margin of 44.59%. While the company has demonstrated significant improvements in gross margins, it continues to operate at a loss, with a negative EBITDA of $135.7 million in the last twelve months. Analysts project negative earnings per share (EPS) for the near future, with estimates of -$1.79 for the first fiscal year (FY1) and -$0.79 for the second fiscal year (FY2).

Want deeper insights? InvestingPro subscribers have access to over 10 additional ProTips and comprehensive financial metrics for TWST, helping investors make more informed decisions.

Despite these negative EPS forecasts, the company has impressed analysts with its gross margin performance. Twist Bioscience reported a notable quarter-over-quarter increase of 300 basis points in gross margins, signaling substantial operational improvements. This progress has reduced some of the risks associated with achieving the company’s target of 50%+ gross margins by the end of 2025.

Product and Market Analysis

Twist Bioscience’s product portfolio focuses on several key areas, including Next (LON:NXT) Generation Sequencing (NGS) and the Express Portfolio. Analysts anticipate continued momentum in these segments, which are expected to contribute to the company’s top-line growth.

A particularly promising area for Twist Bioscience is DNA Storage. The company has made significant progress with its Century Archive Solution, and management has begun targeting early-access customers for this innovative technology. The DNA Storage market represents a potentially lucrative opportunity for Twist Bioscience, as data storage demands continue to grow exponentially across industries.

Operational Improvements

Management’s keen focus on operational improvements has been a key driver of Twist Bioscience’s recent performance. The company’s efforts to enhance efficiency and reduce costs have resulted in better-than-expected gross margins. Analysts project that these improvements will continue, with gross margins expected to climb through 2026 as the company’s top line gains momentum from NGS and the Express Portfolio.

The progress towards achieving the 50% gross margin target by the end of 2025 is seen as a critical milestone for Twist Bioscience. This goal, if achieved, would significantly strengthen the company’s financial position and potentially accelerate its path to profitability.

Future Outlook

Analysts maintain a generally positive outlook for Twist Bioscience, despite the challenging macroeconomic conditions affecting research budgets. The company’s ability to provide fiscal year 2025 guidance that surpasses short-term expectations has bolstered confidence in its growth trajectory.

The DNA Storage market presents a particularly exciting opportunity for Twist Bioscience. As the company continues to develop and refine its Century Archive Solution, it could potentially tap into a vast and growing market for long-term, high-density data storage.

Bear Case

How might negative EPS forecasts impact Twist Bioscience’s growth potential?

The projected negative earnings per share for the upcoming fiscal years raise concerns about Twist Bioscience’s ability to sustain its growth initiatives. Continued losses could potentially limit the company’s capacity to invest in research and development, expand its product offerings, or pursue strategic acquisitions. Additionally, negative EPS may make it more challenging for Twist Bioscience to raise capital on favorable terms, potentially constraining its ability to fund future growth opportunities.

What challenges could Twist Bioscience face in achieving its gross margin targets?

While Twist Bioscience has made significant progress in improving its gross margins, reaching and maintaining the 50%+ target by the end of 2025 may present challenges. Factors such as increased competition, potential supply chain disruptions, or unexpected increases in raw material costs could pressure margins. Moreover, if the company needs to offer price concessions to gain market share or penetrate new markets, it may find it difficult to achieve its margin goals while simultaneously driving top-line growth.

Bull Case

How could Twist Bioscience’s operational improvements drive long-term value?

Twist Bioscience’s focus on operational efficiency and margin improvement could significantly enhance its long-term value proposition. As the company continues to scale its operations and optimize its production processes, it may achieve economies of scale that lead to sustained margin expansion. These improvements could eventually translate into positive cash flow and profitability, potentially attracting a broader range of investors and supporting a higher valuation multiple. Furthermore, enhanced operational efficiency could allow Twist Bioscience to offer more competitive pricing while maintaining healthy margins, potentially accelerating market share gains in key segments.

What potential does the DNA Storage market hold for Twist Bioscience’s future growth?

The DNA Storage market represents a substantial growth opportunity for Twist Bioscience. As traditional data storage methods face limitations in capacity and longevity, DNA-based storage solutions offer the potential for ultra-high-density, long-term data preservation. Twist Bioscience’s Century Archive Solution positions the company at the forefront of this emerging technology. If DNA Storage gains widespread adoption, particularly among large enterprises and government agencies with massive data archiving needs, it could become a significant revenue driver for Twist Bioscience. The company’s early moves in this space could allow it to establish a strong market position and benefit from first-mover advantages as the technology matures.

SWOT Analysis

Strengths:

• Strong gross margin improvements
• Innovative product portfolio, including NGS and Express
• Leadership in emerging DNA Storage technology
• Focused management team driving operational efficiencies

Weaknesses:

• Negative EPS forecasts for the near term
• Continued reliance on capital markets due to operating losses
• Vulnerability to macroeconomic conditions affecting research budgets

Opportunities:

• Expanding DNA Storage market
• Growing demand for NGS and synthetic biology products
• Potential for new applications of DNA synthesis technology
• Increasing adoption of personalized medicine driving demand for genetic tools

Threats:

• Intense competition in the life sciences tools sector
• Potential for technological disruption in DNA synthesis methods
• Regulatory challenges in emerging fields like DNA data storage
• Economic downturns affecting customer spending on research and development

Analysts Targets

• Barclays (LON:BARC) Capital Inc.: USD 58.00 (February 4th, 2025)
• Barclays Capital Inc.: USD 52.00 (November 19th, 2024)
• Barclays Capital Inc.: USD 55.00 (August 5th, 2024)

This analysis is based on information available up to February 4, 2025, and reflects the most recent analyst reports and market data available at that time.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on TWST. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore TWST’s full potential at InvestingPro.

Should you invest in TWST right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if TWST is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate TWST further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if TWST appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.