Twist Bioscience: A Sell Rating Amid Concerns Over Order Sustainability and Premium Valuation

In a report released on May 3, Rachel Vatnsdal from J.P. Morgan maintained a Sell rating on Twist Bioscience (TWST – Research Report), with a price target of $28.00.

Rachel Vatnsdal’s rating is based on a careful analysis of Twist Bioscience’s financial performance and market position. Despite a positive second fiscal quarter in 2024, where revenues and gross margins exceeded expectations, Vatnsdal has concerns about the sustainability of the company’s order growth. The company’s quarter benefited from an increase in Express Genes orders and synthetic biology product line sales, coupled with strength in Next-Generation Sequencing (NGS), which led to better-than-expected gross margins. However, Vatnsdal remains skeptical about the ongoing durability of these orders, noting a significant percentage of the growth could be attributed to one-time, seasonal factors.

Furthermore, while Twist Bioscience’s guidance has been raised, there is a noted decrease in biopharma revenue expectations for the year. Vatnsdal acknowledges the company’s solid performance in the recent quarter and its competitive positioning in the synthetic biology market. Yet, the analyst perceives the stock’s current valuation as too high relative to its peers, suggesting a risk-reward profile that leans more towards the downside. Consequently, the combination of uncertainty around order sustainability and the stock’s premium valuation has led to the Sell rating with an adjusted price target, reflecting the updated forecasts and discounted cash flow assumptions.

TWST’s price has also changed dramatically for the past six months – from $18.660 to $41.210, which is a 120.85% increase.

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Twist Bioscience (TWST) Company Description:

Twist Bioscience Corp. develops proprietary semiconductor-based synthetic DNA manufacturing process. It produces synthetic biology tools such as genes, oligo pools, variant libraries, DNA data storage and NGS. The company also produces agriculture production as well as new applications such as in vivo diagnostics, biodetection and data storage. Twist Bioscience was founded by William Marine Banyai, Emily Marine Leproust and Bill James Peck in February 2013 and is headquartered in San Francisco, CA.