Boston-based Ginkgo Bioworks Holdings, Inc. (DNA) made its market debut on Sept. 17, 2021, through an SPAC merger with Soaring Eagle Acquisition Corporation. DNA has actively supported several COVID-19 response activities, including K-12 pooled testing, vaccine production optimization, and medicines development

However, the stock has plunged 56.3% in price over the past three months and 10.6% over the past month to close yesterday's trading session at $6.10.

The company is undergoing an investigation related to a report released by Scorpion Capital that claims that statements made by company officials have been misleading. In addition, the company's widening losses continue to threaten its future price performance.

Click here to checkout our Healthcare Sector Report for 2022

 Here is what could shape DNA's performance in the near term:

Lawsuit

DNA is under investigation on behalf of investors who purchased its shares. The investigation concerns whether the company or some of its officials violated federal securities laws after a report released by Scorpion Capital on Oct. 6, 2021, alleges that the company is a "colossal scam," that its business model is a "shell game" and that the company is heavily reliant on related party transaction revenues. According to the investigation, the company is also described as a "Frankenstein mash-up of the worst frauds of the last 20 years." These allegations have negatively impacted DNA's shareholders' sentiment about stocks' prospects.

Inadequate Financials

DNA's total revenue increased 483.4% year-over-year to $77.61 million for the third quarter, ended Sept. 30, 2021. However, its operating expenses grew 118.6% from the prior-year quarter to $104.28 million. Its operating loss came in at $26.67 million. The company's net loss grew 291% from its year-ago value to $101.88 million, while its loss per share widened 300% year-over-year to $0.08.

POWR Ratings Reflect Uncertainty

DNA has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DNA has a D grade for Momentum and a C for Quality. The stock is currently trading below its 5-day and 200-day moving averages of $8.15 and $10.19, respectively, indicating a downtrend that is in sync with the Momentum grade. In addition, the company's weak financials are consistent with the Quality grade.

Of  456 stocks in the F-rated Biotech industry, DNA is ranked #367.

Beyond what I have stated above, one can view DNA ratings for Value, Growth, Sentiment, and Stability here.

Bottom Line

DNA's shares have fallen more than 50% in price over the past three months, and the stock is currently trading 61.5% below its 52-week high of $15.86, which it hit on Nov. 9, 2021. Furthermore, given the ongoing lawsuit it is facing and the company's weak financials, we think the stock is best avoided now.

How Does Ginkgo Bioworks Holdings Inc. (DNA) Stack Up Against its Peers?

While DNA has an overall D rating, one might want to consider its industry peers, Vertex Pharmaceuticals Inc. (VRTX), Sino Biopharmaceutical Limited (SBHMY), and Otsuka Holdings Co. Ltd. (OTSKY), which have an overall B (Buy) rating.

Click here to checkout our Healthcare Sector Report for 2022

DNA shares fell $6.10 (-100.00%) in premarket trading Tuesday. Year-to-date, DNA has declined -27.92%, versus a -5.96% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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