With optimism for stocks tied to innovative businesses surging due to anticipated interest rate cuts by the Federal Reserve, growth stock investors have much to cheer about in the current market climate.
Considering the powerful tailwind that lower interest rates offer to growth stocks, a few standout stocks in the growth sector are drawing attention from investment bank analysts. The consensus price targets for these stocks indicate the potential for considerable returns over the next 12 months, with figures suggested to double or even triple initial investments.
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Exploring Ginkgo Bioworks
Ginkgo Bioworks, shortly after its market debut in 2021, boasted a market cap of $24 billion. However, the company’s market value has since collapsed to just $2.7 billion. Despite this, Wall Street analysts expect a significant rebound, with the consensus price target reflecting an impressive 140% return over the next 12 months.
Ginkgo Bioworks, known as the world’s leading synthetic biology company, engineers new strains of microorganisms with unique, valuable properties. Its recent projects include the development of pest-resistant algae strains for biofuel production, backed by a contract from the U.S. Department of Energy.
While Ginkgo has seen growth in its foundry business with 21 new cell programs added in the third quarter of 2023, its financial performance tells a different story. The company reported a significant loss of $686 million in the first nine months of 2023, raising concerns about its sustainability.
Ginkgo’s approach to structuring contracts heavily favors downstream revenue through milestone payments and royalties on related sales, but its ability to convert these into substantial profits has yet to materialize. With a diagnostics business that became a major infectious disease monitoring provider during the early days of the COVID-19 pandemic, Ginkgo’s overall profitability remains uncertain.
Considering its substantial financial losses, investing in Ginkgo may only be suitable for those with an exceptionally high risk tolerance until the company exhibits signs of sustainable financial performance.
Intellia Therapeutics in Focus
Intellia Therapeutics, a pre-commercial-stage developer of CRISPR-based gene therapies, has seen its stock decline by about 39% over the past six months. However, Wall Street analysts anticipate a potential rebound, with average price targets suggesting a remarkable 202% gain in the coming year.
What makes Intellia stand out is its differentiated pipeline, particularly NTLA-2001, an experimental treatment for transthyretin amyloidosis (ATTR), a progressive and often fatal condition affecting a significant population. Unlike CRISPR Therapeutics, Intellia is setting itself apart by focusing on gene editing within the body.
Despite the significant potential of NTLA-2001, its market success remains uncertain. Intellia’s plan to begin a phase 3 trial by the end of 2024 with ATTR patients suffering from heart damage indicates that any substantial revenue generation is still years away.
Given the speculative nature of investing in a pre-commercial-stage biotech company, it’s essential for growth stock investors to carefully weigh the risks before considering Intellia as a potential investment.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics, Intellia Therapeutics, and Pfizer. The Motley Fool has a
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