Twist Bioscience (TWST 3.82%) ranks as one of ARK Invest CEO Cathie Wood's favorite genomics stocks right now. In this Motley Fool Live video recorded on April 21, 2021, Motley Fool contributors Keith Speights and Brian Orelli talk about the stock and some of its key risks.
Keith Speights: So Twist Bioscience has some great growth opportunities and that's what makes it attractive to Cathy Wood but as always, there is the other side of the coin. Brian, what are some of the risks for the stock?
Brian Orelli: I mean, I think the biggest risk is the high valuation, it's not profitable. Price to sales ratio is at 56 percent, which is pretty big.
I think they can grow into the valuation on the revenue side and they are investing a lot for future growth, which is keeping them from being profitable. I think if they cut back on the research and marketing, I think they probably could be profitable, but they definitely have enough cash right now.
They don't really need to do that. They ended last year with $587 million and they lost 33 million in the quarter. I think there's plenty of cash runway.
I think the other worries maybe, there's potential for them to get spread too thin. The antibody production creates sort of a new level of complexity. Rather than just writing the DNA now they're writing the DNA and then expressing proteins from them.
They're doing some internal work to actually use those antibodies potentially as drugs and then I think the plan sounds like they're going to out-license the drug development.
I would really like to see them not take the maybe pass pre-clinical stages. I would rather them stay as a provider rather than a drug developer.
Speights: I think this is a stock that you and I both have had on our radar for maybe a few weeks. I have not pulled the trigger yet. I have not done enough research yet to actually invest in Twist. What about you Brian? Is it still on your radar?
Orelli: It is on my radar and we probably need to stop talking about it so we can buy it [LAUGHTER] or at least have the opportunity to.
Speights: We're prohibited from talking about stocks that we've recently bought or sold.
Orelli: We're buying stocks that we've recently talked about.
Speights: Exactly. So if we don't talk about a given stock for a week, you may suspect something. [LAUGHTER]
Orelli: You can always check our profiles, and see what we actually own.
Speights: Exactly. If we avoid a hot stock, there could be a reason behind it.
