Shares of Amyris (AMRS 41.92%) soared as much as 20.9% today after an article on Seeking Alpha suggested the synthetic biology company could be the next Tesla. The bullish take -- the author's first article published on the platform -- pushed shares over the $4 mark for the first time since late 2019.
On the one hand, what investor wouldn't want to own the next Tesla? Shares of the electric vehicle manufacturer and energy pioneer have jumped 3,570% since the initial public offering (IPO). On the other hand, there are many reasons suggesting Amyris is most definitely not the next Tesla.
As of 11:53 a.m. EDT, the small-cap stock had settled to a 13.1% gain.
The Seeking Alpha article made a handful of arguments as to why Amyris has the wind at its back, but investors that have followed the company's developments over the years might be a little more skeptical. After all, shares of Amyris have lost 98% of their value since the company's IPO.
For example, the article claims Amyris could grow annual revenue from a projected $220 million in 2020 to $600 million by 2022, which is something the company has previously told investors. That sounds great, but the reality is that Amyris has a long history of overpromising and undelivering.
The article also suggests recent and upcoming capital raises will bolster the company's balance sheet. In reality, Amyris can fund itself only by selling shares and significantly diluting shareholders. The business ended March with $3 million in cash and reported a net loss of $86 million in the first quarter of 2020. It also failed to make debt and interest payments totaling $27.6 million in the month of April alone. More worrisome, it hasn't been expensing the cost of product revenue for its second most important source of revenue, which could lead to a significant charge or asset write-off in the coming quarters.
Individual investors need to be careful not to let greed overtake their better judgment. Amyris turned in a solid first-quarter performance, but one quarter is not a trend and certainly not enough to overcome the steep financial headwinds facing the business. If the company issues stock to raise money, investors must realize most of it will be handed to creditors and used to keep the lights on, not invested in growth opportunities. Simply put, investors should stay away from the synthetic biology stock for now. It's not the next Tesla.