Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Zymergen Plunged 62% in August

By Scott Levine – Sep 8, 2021 at 11:27AM

Key Points

  • Customers are having problems with the company's lead product.
  • There's a new CEO in the C-suite.
  • Wall Street turned sour on the stock.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There was nothing synthetic about the decline in this synthetic-biology company's stock last month.

What happened

It wasn't only beachgoers who forgot to apply the sunscreen that were complaining about being burned last month. Investors in Zymergen (ZY), a synthetic-biology specialist, also felt scorched after the stock plummeted 62%, according to data provided by S&P Global Market Intelligence.

Early in August, management provided some disappointing business updates, and a wave of bearish sentiment from Wall Street throughout the month didn't help matters.

A concerned person with closed eyes in front of a laptop.

Image source: Getty Images.

So what

Beginning August on an inauspicious note, Zymergen announced on Aug. 3 that several major customers were encountering challenges with the implementation of Hyaline, a high-quality flexible film used on the screens of electronics, into their manufacturing systems. Zymergen said that it's working to remedy the problems. However, it also stated that it "no longer expects product revenue in 2021, and expects product revenue to be immaterial in 2022."

In the same announcement that addressed the production issues with Hyaline, Zymergen also reported that Jay Flatley would be stepping into the role of acting CEO, following the resignation of Josh Hoffman, the company's previous CEO.

ZY Chart

ZY data by YCharts.

Besides the concerning news from the company, Wall Street's repeated panning of the stock provided another catalyst for the share-price decline. The following are just some of the moves that analysts made on Aug. 4 regarding the stock, according to TheFly.com:

  • HSBC downgraded to reduce from hold with a $8 price target.
  • JPMorgan downgraded to neutral from overweight with a $12 price target.
  • Goldman Sachs downgraded to neutral from buy with a $12 price target.

Then, on Aug. 31, UBS downgraded the stock to neutral from buy, assigning a $13 price target.

Now what

I believe it was Shakespeare who said that revolutionizing manufacturing processes with the use of synthetic biology never did run smoothly. OK, he was talking about love, but it's still valid. Innovative growth companies like Zymergen are bound to encounter hiccups as they break new ground, so Zymergen's challenges with Hyaline shouldn't come as a shock. Therefore, those who are bullish on the company's prospects should sit pat. However, if Zymergen continues to report that technical issues are plaguing its customers, it may certainly raise a red flag.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Scott Levine has no position in any of the stocks mentioned. The Motley Fool recommends HSBC Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zymergen Inc. Stock Quote
Zymergen Inc.
ZY

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.