Is Ginkgo Bioworks (DNA) a Sell Despite Recent Institutional Buying and Earnings Outages?

In the volatile world of biotech investing, Ginkgo Bioworks (DNA) has recently sparked debate. Despite a 16% rally in its share price since August 2024 and a flurry of institutional activity, the stock remains down over 83% from its 52-week high. This raises a critical question: Is the recent optimism masking deeper fundamental weaknesses that justify a short-term exit strategy?

The Rally and Institutional Activity: A Mixed Signal

Ginkgo's Q2 2025 earnings report and SEC Form 13F filings reveal a complex picture. Institutional ownership now includes 235 shareholders, with Viking Global Investors slashing its stake from 143 million to 3.6 million shares, while BlackRock increased its position to a 6.5% ownership stake. ARK Investment Management's complete exit of 198 million shares further underscores skepticism.

The stock's recent rebound to $13.46 per share has been fueled by cost-cutting measures and improved adjusted EBITDA. However, this rally appears disconnected from the company's core financials. For instance, Biosecurity revenue—a critical growth segment—plummeted from $20 million in Q2 2024 to $10 million in Q2 2025, attributed to geopolitical delays in international contracts. Meanwhile, Cell Engineering revenue grew 8% to $39 million, but this segment now accounts for 78% of total revenue, highlighting overreliance on a single business line.

Financial Fundamentals: Progress, But at What Cost?

Ginkgo's Q2 2025 results show a GAAP net loss of $60 million (vs. $217 million in 2024) and adjusted EBITDA of -$28 million (vs. -$99 million). While these improvements are commendable, they mask structural issues. The company's cost savings of $250 million (achieved ahead of schedule) have come at the expense of workforce reductions and site consolidations, which could strain long-term innovation.

Liquidity remains robust, with $474 million in cash and equivalents, but this is offset by a cash burn rate of $58 million in Q1 2025 (vs. $104 million in 2024). The debt-to-equity ratio of 1.01 and liquidity ratios (current ratio: 5.41; quick ratio: 5.13) suggest a stable balance sheet, yet the company's Altman Z-Score of -6.5 indicates heightened financial risk.

Valuation and Guidance: A Tale of Two Narratives

Ginkgo's valuation metrics tell a conflicting story. The stock trades at an enterprise value/revenue ratio of 2.36, far below peers like Zymergen or Synthetic Genomics, which faced liquidity crises. However, this low valuation is justified by the company's unprofitable status and reliance on government contracts. For 2025, Ginkgo projects $167–187 million in revenue, with Biosecurity revenue capped at $40 million—a 20% reduction from prior guidance.

The company's path to adjusted EBITDA breakeven by 2026 hinges on maintaining cost discipline and securing high-margin contracts. Yet, the Biosecurity segment's vulnerability to geopolitical shifts and the Cell Engineering segment's dependence on biopharma demand create significant uncertainty.

Institutional Sentiment vs. Market Reality

The Fund Sentiment Score, which tracks institutional accumulation, suggests modest interest, but the put/call ratio indicates mixed sentiment. Passive funds (which dominate the score) may be inflating optimism, while active managers like Viking and ARK are hedging or exiting. This divergence highlights a disconnect between short-term market enthusiasm and long-term fundamentals.

Investment Implications: A Sell Case

For short-term investors, the case for a sell is compelling:
1. Revenue Volatility: Biosecurity's decline and Cell Engineering's narrow focus expose Ginkgo to sector-specific risks.
2. Unprofitability: Despite cost cuts, the company remains unprofitable, with a negative EPS of -$1.10 and a beta of 2.94, amplifying downside risk.
3. Valuation Mismatch: The stock's 83% annual decline reflects market skepticism. While the current price may seem attractive, it is priced for a company that is not yet a cash-flow generator.

Conclusion: Exit Before the Storm

Ginkgo Bioworks' recent rally is a classic case of “buy the rumor, sell the news.” While institutional buying and cost-cutting efforts are positive, they do not offset the company's fundamental weaknesses. For investors seeking to mitigate risk, a short-term exit is prudent. The stock may find a floor if the company secures high-margin contracts or achieves EBITDA breakeven, but until then, the risks outweigh the rewards.

In a market where patience is a virtue, Ginkgo's story is one of caution—not conviction.