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The latest analyst coverage could presage a bad day for Ginkgo Bioworks Holdings, Inc. (NYSE:DNA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from Ginkgo Bioworks Holdings' nine analysts is for revenues of US$306m in 2024, which would reflect a small 2.9% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 33% to US$0.29 per share. However, before this estimates update, the consensus had been expecting revenues of US$350m and US$0.24 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for Ginkgo Bioworks Holdings
The consensus price target fell 12% to US$3.52, implicitly signalling that lower earnings per share are a leading indicator for Ginkgo Bioworks Holdings' valuation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 2.3% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 38% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ginkgo Bioworks Holdings is expected to lag the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Ginkgo Bioworks Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Ginkgo Bioworks Holdings' revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Ginkgo Bioworks Holdings analysts - going out to 2025, and you can see them free on our platform here.