With stock markets having had a tough month so far, investors are understandably nervous about what the near future could bring. After a good start to 2023, some market participants are eager to lock in gains and avoid any risk of a slump to finish the year.
The uncertainty in the investing community is evident from the steep moves in share prices, both upward and downward. On Wednesday morning, NextEra Energy Partners (NEP -0.89%) was among the biggest decliners, while Ginkgo Bioworks (DNA 10.60%) got a nice boost. Smart investors are noticing these two companies and want to know what's justifying the moves. Here's your opportunity to be in the know and learn more about NextEra and Ginkgo.
NextEra pulls back on expectations
Shares of NextEra Energy Partners dropped 9% in premarket trading early Wednesday. The master limited partnership (MLP) made some projections about its business that reined in expectations among its unitholders.
NextEra announced that it was adjusting some of its expectations about its business, with significant implications for its investors. The company cut its projected growth in distributions to its limited partners, with new guidance calling for gains of 5% to 8% per year through 2026. NextEra said that high interest rates and tight monetary policy made it impractical for the master limited partnership to get enough financing to sustain a higher 12% distribution growth rate.
In addition, NextEra Energy Partners said it did not anticipate needing to sell additional partnership units for growth purposes until 2027. That could potentially reduce dilution, although the master limited partnership did note that it could still opportunistically choose to issue new equity if conditions warranted.
Over the long run, NextEra Energy Partners is still optimistic about its portfolio of renewable energy projects, which it sees providing 58 gigawatts of electrical generation capacity by 2026. Yet with more measured projections for pre-tax operating earnings and future distributions, unitholders in the MLP see the need to adjust their own expectations further.
Ginkgo makes a deal
Shares of Ginkgo Bioworks moved in the other direction, climbing 12% early Wednesday. The biotech company announced a major collaboration that could stoke its prospects for years to come.
Ginkgo said that it will work with pharmaceutical giant Pfizer (PFE 0.55%) to devote more resources toward discovering drug candidates based on Ginkgo's proprietary RNA technology. As part of the deal, Pfizer will make an upfront payment to Ginkgo. Furthermore, Ginkgo will be eligible to receive research fees as well as milestone payments for various development and commercial events. In total, payments could be as high as $331 million, with the possibility of additional money from royalties based on future revenue.
For Pfizer, the move allows it to take advantage of the proprietary RNA platform that Ginkgo has put together over the years. Pfizer sees itself better able to find higher-quality candidate treatments that could be more effective in fighting a variety of diseases. Meanwhile, Ginkgo co-founder and CEO Jason Kelly believes that access to Pfizer's team could help it tap valuable expertise in drug development.
Ginkgo has lost 80% of its value since coming public through a special purpose acquisition company merger in 2021. For Pfizer to see value in a collaboration, however, is a positive sign, and it's one that could generate further interest in Ginkgo among investors.